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TABLE OF CONTENTS INTRODUCTION......................................................................................................... 2
Context .......................................................................................................2 Objectives and the purpose of the Document............................................4 Summary of the Document ........................................................................5
1. SITUATION AND EXPECTED REFORMS IN THE PERIOD 2007 -2009....... 7 1.1. The achieved level of reforms .............................................................8 1.2. The implementation of international assistance to the Republic of
Serbia between 2000 and 2005.........................................................13 1.3. Main development objectives and priorities ......................................14 1.4. Growth projection and the needs for international assistance ..........19
2. INTERSECTORAL PRIORITIES FOR INTERNATIONAL ASSISTANCE........... 25 2.1. Employment Generation– Economic Development and Education in
the function of Increasing Employment .............................................26 2.2. Building and strengthening institutional capacities ...........................37 2.3. Building, reconstructing and modernising the infrastructure.............45 2.4. Environmental protection...................................................................56 2.5. Rural development ............................................................................69
3. OVERVIEW OF THE SITUATION BY SECTOR - SECTORAL PRIORITiES AND NEEDS IN THE PERIOD 2007 - 2009................................................................. 76
3.1. Finances ............................................................................................77 3.2. Public administration and local self-government...............................88 3.3. Economy............................................................................................95 3.4. Labour, employment and social policy ............................................115 3.5. Agriculture, forestry and water management ..................................132 3.6. Mining and energy ...........................................................................143 3.7. Trade, Tourism and Services ..........................................................165 3.8. Education and Sports ......................................................................170 3.9. Culture .............................................................................................180 3.10. Health ............................................................................................185 3.11. Science and Environmental Protection .........................................199
Science.................................................................................................. 199 Environmental Protection ...................................................................... 205
3.12. Internal Affairs ...............................................................................215 3.13. Capital Investment.........................................................................232
Transport ............................................................................................... 232 Telecommunications.............................................................................. 244 Urban and spatial planning and housing policy ..................................... 246
3.14. Justice............................................................................................250 3.15. Promoting international economic relations ..................................261 3.16. Defence .........................................................................................275
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INTRODUCTION
Context
Upon the political changes which occurred in October 2000 and at the beginning of
economic reforms and transition to a market economy, the Government has faced
numerous challenges, from establishing macroeconomic stability and fiscal discipline,
regulating foreign and internal debt, high unemployment, weak economic activity, bad
state of the infrastructure, social problems and arrears in payments of welfare
benefits and pensions, to political issues, such as redefining Serbian-Montenegrin
relations, the issue of Kosovo and Metohija, cooperation with the International War
Crimes Tribunal in the Hague. Apart from urgent interventions (rehabilitation of the
power generation and transmission systems and import of electricity, settling the
arrears in pension and welfare benefits, ensuring sufficient supply of drugs and
medical equipment, etc.), the launching of reforms also meant the intensive work on
legal and institutional system changes, as well as the establishment of mechanisms
to implement those laws. This was the beginning of foreign trade, price and internal
market liberalisation, reforms in the fields of the pension system, social welfare
system, banking sector, public finances, health system, as well as the beginning of
the public administration reforms and decentralisation; reforms in the fields of
agriculture, energy and education, development of private sector, etc. In parallel, the
process of re-entering into membership of international organisations, integration in
regional and international institutions and initiatives, accession to the World Trade
Organisation was ongoing, and as main Government’s political priority the process of
EU integrations was assumed.
In that context, the Republic of Serbia needed comprehensive international financial
assistance. Since 2001 it played an important role in addressing urgent issues and,
as well, in supporting reforms, rehabilitation of infrastructure and promoting European
integrations. In the view of importance of efficient coordination and to be able to
monitor the overall international assistance extended to the Republic of Serbia, the
Ministry of International Economic Relations established Sector for Donations and
Development Assistance, in charge of the coordination, monitoring and
harmonisation of donations.
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The significance of international assistance is clearly reflected in the fact that from
late 2000 to 2005, out of the total of 5,502.59 million euros of assistance announced
to the Republic of Serbia, 3,528.47 million euros was disbursed in the same period.
The nature of international assistance changed over the years; in late 2000 and in
2001 it was mainly humanitarian and urgent assistance. In later years the share of
development assistance and soft loans increased whereas the share of grants
tended to drop as compared to soft loans.
In order to promote the efficiency and effectiveness of international assistance
extended to the Republic of Serbia; Ministry of International Economic Relations
initiated the preparation of strategic intersectoral documents which were presented to
the international community at donors’ conferences for the FRY/ Serbia and
Montenegro. In June 2001, the document “Reform Agenda of the Republic of Serbia -
Needs for International Financial Support from 2001 - 2003” was presented at the
Donors’ Conference for the FRY in Brussels. In this document the main reform goals
and objectives of the Republic of Serbia were defined and, needs for international
assistance by sector were estimated. In Brussels, in November 2003, at the Donors’
Coordination Meeting for Serbia and Montenegro the document “Serbia on the Move
– Three Years Later”, was presented to the donor community. The document gave a
comprehensive overview of the reforms and activities implemented in the previous
period and the reform objectives and implementing plans for the following three years
with the estimated one-off reform costs. The document defined five key areas of
priority for the Republic of Serbia in order to ensure additional international support.
The areas were civil society, media and democratisation; reforms of the public
administration and local self-government; European integrations; rule of law and
removal of the obstacles to the development of enterprises and entrepreneurship. In
the period between donors’ conferences, these documents served as guidelines for
directing new donations and planning funds. As the document “Serbia on the Move -
Three Years Later” covered the period between 2003 and 2005 and bearing in mind
the distinguished reform results achieved in various fields as well as the new
strategic framework established in the meantime, there is a need to draw up a new
intersectoral document, and review the results achieved so far and to define the
needs for international support in the next period under the current strategic
commitments and financial projections.
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Objectives and the purpose of the Document The Ministry of International Economic Relations initiated drafting of the intersectoral
programmatic document entitled “Needs of the Republic of Serbia for International
Assistance in the Period 2007 - 2009” defining priority programme activities within
sectors and intersectoral priorities for international assistance. The purpose of this
document is to serve as a platform for programming international assistance in order
to make it more effective. The document is based on the existing strategic framework
and defined medium-term objectives. Its goal is to enable establishment of an
operational programme of priority activities and projects and its implementation in the
future. The purpose of the document is to support implementation of the
Government’s reforms and strategic objectives within the three- year framework and
secure satisfactory level and structure of international assistance. The document will
be presented to the donor community. The Government will estimate the level of
grants needed on the annual basis to fill financial gaps in the implementation of its
priority reform policies and programmes and to present the donors national
development priorities which will be in its focus in the following years.
The document should:
- define priority objectives and plans/programmes for implementing these objectives
by sectors,
- identify intersectoral priorities for international support in the next three year
period,
- offer a financial assessment of the international assistance at the annual level,
bearing in mind macroeconomic projections for a three year period.
For that purpose, the document will serve as an instrument for donor harmonisation
within the Paris Declaration adopted by donors and the aid recipient countries at the
Paris Forum on Aid Effectiveness, held in March 2005. The programmes defined by
this document will be a basis for programming international assistance in 2007.
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Summary of the Document
The Document is based on the existing strategic framework:
- Serbia’s National Strategy for Serbia and Montenegro’s Accession to the
European Union,
- the Poverty Reduction Strategy,
- Sectoral strategies,
- European Partnership Priorities,
- Budget Memorandum and Economic and Fiscal Policy for 2006, with projections
for 2007 and 2008, as well as the Budget Memorandum and Economic and Fiscal
Policy for 2007, with projections for 2008 and 2009.
As an intersectoral programmatic framework, the Document offers an overview of the
present situation, medium-term objectives and priority action programmes for their
realisation in the period between 2007 and 2009, by sector. The action programmes
are incorporated within the strategic framework aimed at defining the priorities which
will ensure the most effective allocation of financial resources and other forms of
assistance. Furthermore, the tables of priority reform and investment projects, by
sector, contain all priorities regardless of the sources of financing (specifying whether
domestic or foreign funds have already been allocated for the programmes/projects).
They constitute a single programmatic platform aimed at providing the donors with an
insight into the activities planned by the Government and enabling both donors and
the Government to coordinate the allocation of domestic and external financing
resources. Priority programmes/projects identification results from medium-term
objectives within sectors, defined in the above mentioned strategic documents.
Therefore, starting from the medium-term priority objectives defined in the
Governmental strategic documents, a single priority list will be drawn up within each
sector, as well as programmes/projects for their implementation. The line ministries
participating in the preparation of the Annual Operational Action Plans (GOPs), as
pilot ministries within the Joint Project “Towards the More Effective Implementation of
Reforms”1, used the 2007-2009 Annual Operational Plans as a basis for drawing up
their input to this Document.
1 The Joint Project “Towards the More Effective Implementation of Reforms”, financed by the Norwegian Government, was initiated by the Ministry of International Economic Relations, the Ministry of Finance, the Ministry of Public Administration and Local Self-Government and the European Integration Office, in order to improve planning, budgeting, monitoring and reporting in the relevant ministries. One of the basic goals of the Joint Project was to improve the capacity of the line ministries for planning, through
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The second chapter of the Document defines intersectoral priorities for international
assistance. The purpose of this chapter is to identify key areas, from the national
point of view, in which, international assistance is required in the following period.
The content of this chapter would serve to the international partners as reliable
resource in drawing up their strategic documents, identification of the objectives and
priorities of their actions and sound approximation of the level of their assistance to
be extended to the Republic of Serbia. The document identifies five priority areas and
some basic directions of development and priority measures/objectives in those
areas in the period 2007 - 2009. The criteria for identifying priority/key areas for
international assistance between 2007 and 2009 were the level of priority and
significance under the Government’s strategic documents, the achieved level of
reforms and the assessment of implementation of the strategic reform objectives, the
importance of ensuring international technical assistance and expertise for carrying
out the activities planned in the relevant area and the possibility to secure financial
assistance from other resources (the republican budget, own budgets of the relevant
institutions, borrowing from the IFIs, private investments).
On the basis of macroeconomic projections, the needed level of international
financial support at the annual level was estimated for the period 2007 -2009 in the
form of concession loans and grants required for implementing the projected growth
rates of the GDP.
The work on the document was entrusted to the Economics Institute. All relevant line
ministries and the competent Government institutions participated in this process and
contributed to the joint work and results (the European Integration Office, the Poverty
Reduction Strategy Implementing Team). Intersectoral priorities for international
assistance (analysed in detail in the second chapter), were considered and approved
by the Government’s Commission for Humanitarian and Development Assistance
Coordination.
It is envisaged that the Document should be revised annually2 so as to include one
additional year, also including the achieved reform results, the resources committed
for priority projects financing, as well as new priority projects/programmes.
developing comprehensive and realistic annual action plans and their linking with the preparation of the budget and programming and using international assistance 2 The EU regulation introducing a new EU financial instrument – IPA – Instrument of Preaccession Assistance) explicitly states that the beneficiaries of this assistance are expected to introduce annual supplements for three year indicative development plans (the roll-on principle).
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1. SITUATION AND EXPECTED REFORMS IN THE PERIOD 2007 -2009
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1.1. The achieved level of reforms Macroeconomic stabilisation, beginning of market oriented reforms and the European
integration process in Serbia between 2000 and 2006, were carried out in the
politically unstable environment, particularly reflected in the change of status of the
State – i.e. redefining relations between Serbia and Montenegro, establishing the
State Union of Serbia and Montenegro, adopting the Constitutional Charter in
February 2003, the referendum on the Republic of Montenegro’s independence in
May 2006, as well as the extraordinary session of the Serbian Parliament in June
2006 at which it was noted that Serbia was the sole successor of the State Union of
Serbia and Montenegro, its international legitimacy and international treaties. In
November 2006 the National Parliament proclaimed the Constitution of the Republic
of Serbia and adopted the Constitutional Law for implementing the Constitution.
Macroeconomic trends in the period between 2001 and 20053. The period
between 2001 and 2006 is characterised by intensive reforms, the establishment of
macroeconomic stability and sustainable and stable economic development, the
restructuring of the big public utilities, the privatisation of enterprises and the
beginning of the EU integration process (entailing numerous legal adjustments in all
economic and social areas). The main economic policy goals were maintaining
macroeconomic stability, while at the same time ensuring high economic growth
rates. Economic activity after 2000 was supported by the positive effects of economic
transition and reforms of the tax system, labour market and social sector;
furthermore, prices and foreign trade were deregulated and liberalised to a large
extent, while relations with international financial institutions were normalized.
Significant progress was made in implementing structural reforms, particularly in the
privatisation of enterprises and the consolidation and privatisation of the banking
sector. 350 laws were adopted, establishing the strong legal ground for structural
reforms implementation.
In the period between 2001 and 2005 a high real growth of the GDP was achieved at
the rate of 5.6% per year. In 2004 the highest GDP growth rate of 9.3% was
achieved, based on industrial growth, agricultural production growth and the
significant growth of the service sector, in particular of the PTT and
telecommunications, as well as of retail sales. In 2005 a considerable GDP growth of
6.8% was achieved, which was above the economic growth projected for 2005 3 Source: The 2007 Memorandum on the Budget and Fiscal and Economic Policy, with projections for 2008 and 2009.
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(5.1%). In 2005 it was the service sector that contributed most to the economic
growth. In the last two years a high GDP growth rate of 8.0% was achieved. A
cumulative real GDP growth of 31.3% between 2000 and 2005 was an important
result of economic policy, achieved in the circumstances of transition and
unfavourable trends in the world economy and trade. In this period GDP per capita
increased over three times – from around 1,000 US$ in 2000 to 3,526 US$ in 2005.
The considerable growth of economic activity and exports was accompanied by
double-digit inflation. In the period between 2001 and 2005 progress was made in
reducing inflation which had increased enormously in the previous decade and in
2001. Inflation was reduced from 91.8% in 2001 to 19.5% in 2002, 11.7% in 2003,
10.1% in 2004 and 16.5% in 2005 (the annual average). This is a significant result in
view of the fact that it was achieved under the conditions of crude oil price growth
and price disparity corrections. The stability of the general price level was based on
foreign exchange stability and the continued growth of foreign exchange reserves of
the National Bank of Serbia (which increased from 0.5 billion US$ in late 2000 to 5.8
billion US$ in late 2005), as well as a strict monetary, fiscal and wage policy in the
public sector.
Another field in which progress was made was the standard of living. There was a
considerable real rise of the average net salary from 102 Euro in 2001 (152 Euro in
2002, 176 Euro in 2003, 193 Euro in 2004) to 210 Euro in 2005, as well as a rise of
the average pension from 69 Euro in 2001 (108 Euro in 2002, 120 Euro in 2003, 127
Euro in 2004) to 138 Euro in 2005. Overall employment was reduced in 2002 and
2003 as a result of privatisation and restructuring of enterprises, while in 2004 and
2005 there was a slight increase of employment by 0.5% and 0.9% respectively,
particularly in SME sector. A high deficit in the current account of the balance of
payments in the past five years mainly has been the result of negative trade balance,
caused by faster growth of import than export of commodities, which led to a high
foreign trade deficit. Expressed in euros, this deficit increased in 2002 by 31% (in
2003 by 10.8%, in 2004 by 39.7%) while in 2005 it was reduced by 25%. Profit from
services greatly affected the current account trends; expressed in euros, it rose in
2002 by 6.6% (in 2003 it was at the level of the previous year and in 2004 it
increased by 34.9%), while in 2005 the trade deficit dropped due to imports increase
and exports decrease.
The low birth rate and ageing of the population, a trend which had prevailed for many
years, continued in the period between 2001 and 2005. Employment fluctuated, with
a considerable increase of unemployment. The average net salary rose beyond the
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real GDP growth and labour productivity, especially in the first three years of
transition. The table below shows selected indicators of demographic and social
trends:
Table 1: Population, employment, salary and productivity indicators 2001 2002 2003 2004 2005 Population in 000 7,534 7,500 7,481 7,463 7,450 Population growth rate in % -0.26 -0.40 -0.25 -0.24 -0.17 Working population in 000 5,072 5,045 5,024 5,008 5,002 Number of the employed in 000 2,102 2,067 2,040 2,051 2,069 Employment growth rate in % 0.2 -1.7 -1.3 0.5 0.9 Number of the employed in the public sector in 000* 395,2 405,4 406,9 416,0 422,0 Employment growth rate in the public sector in % 4.0 2.6 0.4 2.2 1.4 Unemployment rate (ILO) in % 12.2 13.3 14.6 18.5 20.8 Real growth rate of average net salary in % 16.5 29.9 13.6 10.1 6.4 Labour productivity growth rate in the economy in % 4.9 6.3 3.8 8.8 5.6
In the period between 2001 and 2005 the Republic of Serbia reformed public
finances, which, in conjunction with the overall macroeconomic policy, ensured the
stability and viability of the system; as a result, the deficit was eliminated and
replaced by a surplus in 2004 and 2005.
The reforms strengthened the role of public finances in achieving some basic
objectives – macroeconomic stability and sustainable economic growth, and
rendered the fiscal system transparent, simple and harmonised with international
standards.
The most significant novelty was the adoption of the Law on the Budget System,
which, as a system law, regulates public finances in the Republic, as well as the
budget system and public finances management. The adoption of this law introduced
a modern concept, based on international experiences, in all segments of public
finances and the public sector as a whole. This is the first fundamental act
introducing changes at all levels of the government (the republican budget and local
government budgets, including the organisations of mandatory social insurance).
The budget system was organised on a new foundation and regulated in a new
manner, especially in the field of public finances management. The changes
introduced were uniform planning, preparation, adoption and implementation of the
republican budget and the budgets of territorial autonomies and local self-
government, as well as planning in the organisations of mandatory social insurance.
In this sense, it is of particular importance that new institutions were set up, notably
the Treasury Directorate of the Republic, as well as the treasuries of lower levels of
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government, serving as a pillar in public finances management. After being
implemented for three years, the Law on Budget was amended in 2005 in order to
improve the whole fiscal system/administration. Under the amendments, the former
Public Payment Agency was attached to the Treasury Directorate. A new budget
classification was adopted and the chart of accounts for public revenue payments
reviewed.
The tax system also underwent reforms. The most significant reform in this area was
the adoption and successful implementation of the Law on the Value Added Tax.
Furthermore, the Parliament passed the Law on Public Procurement, the Law on
Public Debt and the Law on Tax Procedure and Tax Administration. Reporting to the
Serbian Parliament, as well as public information concerning public revenue and
expenditure, was improved by submitting the republican budget annual balance for
2002, 2003 and 2004 and by monthly publishing information on public revenue and
expenditure at all levels of government. Public revenue and public expenditure were
reviewed by adopting a Law on the State Auditing Institution. Thus, an institutional
framework for modern and efficient public finances in Serbia was established, which
resulted, in conjunction with other measures, in a surplus at the end of the period.
Structural reforms. Considerable progress was achieved in implementing structural
reforms, particularly in the area of privatisation of enterprises and consolidation and
privatisation of the banking sector. Between 2002 and 2005, 1,844 enterprises were
privatised, with the privatisation proceeds of 1.8 billion Euros. As for the banking
sector, the number of banks was reduced from 86 in 2001 to 40 banks in late 2005,
the ownership structure of the banks was changed, trust in the banking system
promoted and new foreign exchange savings increased from 329.8 million Euro in
late 2001 to 2,238.7 million Euro in late 2005. Four majority state-owned banks were
privatised yielding the privatisation proceeds of 562.2 million Euro. There was a
significant increase of foreign direct investment (FDI) inflow- the net FDI rose from
165 million US$ in 2001 to 475 million US$ in 2002, 1.36 billion US$ in 2003, 966
million US$ in 2004 and 1.48 billion US$ in 2005. There was progress in domestic
and foreign trade liberalisation. Furthermore, positive results were registered in the
reforms of the labour market and social sector. In 2000 Serbia’s foreign debt was
estimated at 169% of the GDP; in 2005 Serbia’s foreign debt was significantly
reduced to 58.97% of GDP (source: the NBS).
However, there are numerous challenges yet to be faced in order to implement
transition and reforms, ensure economic development, improve the economy’s
competitiveness, reduce high unemployment, the balance of payments deficit and
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poverty, and to increase the overall standard of living. In the years to come, activities
aimed at EU accession will be especially focused on - harmonising regulations with
the European Union regulations, implementing European partnership priorities and
building and strengthening the institutions.
The assessment of transition results. All these characteristics (both positive and
negative) are largely the result of the achieved level of transition and reforms. By
means of transitional indicators, the European Bank for Reconstruction and
Development (EBRD) summed up the progress made by 27 transitional countries in
structural and institutional reforms. Nine transitional indicators include four key
market economy elements: enterprises, the market and trade, financial institutions
and the infrastructure. Each indicator is measured according to the standards of
developed market economies and represents a synthesised assessment of the
progress achieved in a particular field. Transitional countries made big headway in
structural and institutional reforms throughout the past year, but with different levels
of success. The table below shows transitional indicators for Serbia, the countries of
the region and for selected transitional economies.
Table 2 – Transitional indicators in selected transitional economies
Note: Transitional indicators range from 1 to 4+. Indicator 1 means that there are no changes in relation to the socialist system, while indicator 4+ denotes the performance similar to that in developed countries. Source: EBRD, “Transition report 2005”
An analysis of individual EBRD indicators in 2005 shows that Serbia and Montenegro
was assessed with the highest indicator (4) for price liberalisation, (4-) for foreign
trade regime (trade liberalisation and the foreign exchange system) and (3+) for the
privatisation of small-size enterprises, where the transitional process progressed
4 In the original table there was Serbia and Montenegro instead of Serbia; however, all conclusions mentioned for Serbia and Montenegro are fully valid for the Republic of Serbia.
Privatis. Privatis. Restructur. Liberalis. Foreign Competit. Reform of Securities and Average value
Country of big of small of Of trade policy the banking financial Infrastruct. of transitional
enterprises enterprises enterprises prices system system markets indicator
Serbia4 3- 3+ 2+ 4 4- 1 3- 2 2 2.63
Transitional economies of South-East Europe
B-H 3- 3 2 4 4- 1 3- 2- 2+ 2.56
Albania 3 4 2 4+ 4+ 2 3- 2- 2 2.9
Macedonia 3+ 4 2+ 4 4+ 2 3- 2 2 2.95
Croatia 3+ 4+ 3 4 4+ 2+ 4 3- 3 3.43
Bulgaria 4 4- 3- 4+ 4+ 3- 4- 2+ 3 3.41
Romania 4- 4- 2+ 4+ 4+ 2+ 3 2 3+ 3.21
Advanced transitional economies
Hungary 4 4+ 4- 4+ 4+ 3 4 4 4- 3.92
The Check Republic 4 4+ 3+ 4+ 4+ 3 4 4- 3+ 3.8
Poland 3+ 4+ 4- 4+ 4+ 3 4- 4- 3+ 3.73
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most. As compared to the previous period, progress was made in the privatisation of
big enterprises (3-), restructuring of the banking sector, building of a securities
market (3-) and restructuring of enterprises (2+). Modest results (indicator 2) were
achieved in the field of financial markets and infrastructure reforms. The greatest lagging behind or no progress was registered in the field of anti-monopoly policy,
assessed with the lowest indicator (1). It can be therefore concluded that the priority
fields in which reforms must be intensified in the next period are as follows:
privatisation and restructuring of big enterprises, competitiveness policy, reforms of
the banking system, reforms of the financial market and the infrastructure. These
fields will be analysed in more detail in the next chapter.
Although Serbia achieved the greatest progress and was proclaimed the reform
leader in 2005, Serbia and Montenegro must do a lot in order to catch up with the
more successful countries of the region. The comparison of the average annual
transitional index between transitional economies, showing that 21 countries were
more advanced than Serbia in 2005, is the best testimony to that.
1.2. The implementation of international assistance to the Republic of Serbia between 2000 and 2005
The overall realised international assistance extended to the Republic of Serbia
between 2000 and 2005 amounts to some 3.5 billion Euro. In the wake of the
democratic changes which took place in 2000, international assistance was focused
on rapid solving of urgent problems, humanitarian and social issues, achieving
macroeconomic stabilisation, rehabilitation and reconstruction infrastructure systems,
as well as for launching the process of reforms and European integrations. This is
precisely the reason why the level of international assistance was the highest in the
first two years of transition; in that period the trends that could be noticed were – the
reduction of humanitarian assistance as compared to development assistance,
reduction of grants as compared to concession loans and changes in sector
distribution of approved assistance.
Table 3: An overview of disbursement of international assistance per year in million of Euro 2000 2001 2002 2003 2004 2005
166.88 836.57 776.53 645.07 427.97 652.29 Source: The 2005 Report on International Assistance to the Republic of Serbia, the Ministry of International Economic Relations, 2006.
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In the last five years, international assistance was largely implemented through
different forms of international technical assistance and investments in all economic
and social sectors. In the period between 2000 and 2005, the sectors that received
the largest share of assistance were: the budget – financing of one-off reform costs in
all sectors (19.1%), energy (17.1%) and transport (15.4%). Apart from that,
considerable assistance was aimed at developing the private sector, local self-
government, the health sector, while in the period up to 2003, significant international
assistance was allocated to the social sector.
International assistance extended to the Republic of Serbia has been primarily used
for covering one-off reform costs that are extremely high (reforms of the pension
system, health sector, labour legislation, the fiscal sector, etc.), as well as for
establishing new institutions of a modern market economy. It is assessed that further
development of democracy and fight against corruption and organised crime can be
intensified only under stable economic conditions; this is why considerable and
continued donor support is absolutely necessary by the year of 2010, irrespective to
the level of GDP growth.
1.3. Main development objectives and priorities The following documents constitute a strategic framework for defining Serbia’s
development goals: the National EU Accession Strategy, the National Strategy for
Serbia’s Economic Development, the Poverty Reduction Strategy, the Strategy of
Serbia’s Sustainable Development, the Strategy for Foreign Investment
Encouragement and Development and, finally, a number of sectoral development
strategies (export promotion, employment, development of science and technology,
development of education, agriculture, energy, environmental protection, etc.).
Strategic commitment of the Republic of Serbia is the EU accession and it has wide
political and social support. The path to the European Union is seen as a path
towards a more modern society of stable democracy and prosperous economy. The
EU political and economic requirements are seen as a development incentive rather
than conditionality.
The European Union expects the Republic of Serbia to meet all conditions contained
in the EU association and accession policy, which is an elaborated version of the
Copenhagen criteria applicable to the countries of Eastern and Central Europe. In
15
that view, the Republic of Serbia should seek to achieve the rule of law, a stable
democratic order, high standards of human and minority rights protection, as well as
to establish a market economy, legislation aligned with the EU and an efficient public
administration.
In the view of above, in the next period the Government will remain focused on
ensuring rapid harmonisation of system laws with the EU acquis communautaire (so
far, only 1/3 of all laws have been fully harmonised with EU standards), on
strengthening institutions, the rule of law and efficient operation of public
administration. The Government will intensify legal, institutional and structural
reforms aimed at modernising economic legislation, establishing market institutions
compatible with the standards of developed market economies and achieving
administrative reforms to render an efficient public administration and judiciary. This
will create a stable macroeconomic environment supported by a stable institutional
framework.
The National EU Accession Strategy was adopted in order to prepare Serbia for EU
membership by 2012, or, in other words, to meet EU accession requirements, under
the criteria established by the Stabilisation and Association Process (SAP) and the
Copenhagen criteria. Serbia has so far created a basis for accelerating EU accession
process through various activities. It started negotiations for the stabilisation and
association process5 in order to prepare itself for fulfilling high European standards
concerning the functioning of the market economy and the rule of law, as well as
concerning democratisation and human rights- the key requirements for a full-fledged
EU membership.
The Poverty Reduction Strategy promotes development oriented towards poverty
reduction through ensuring dynamic economic growth, higher employment and
salaries, preventing new poverty in the process of privatisation and economy
restructuring and promoting the social security network for the most vulnerable social
groups. The poverty reduction strategy is aimed at prompting economic growth and
employment as the key prerequisites for settling fundamental poverty problems
through faster employment, more efficient social protection, better access to health,
education and housing.
The National Strategy of Serbia’s Economic Development defines the basic
objectives and directions of development on the path to a modern society, developed
economy and a better quality of life of all citizens. At the same time, it is a path 5 The negotiations came to a standstill since Serbia had not fully cooperated with the International War Crimes Tribunal in the Hague.
16
towards EU association and accession, in which Serbia will activate all of its human
resources, material, natural and geo-strategic potentials, accelerate reforms and
affirm a new role of the state. Furthermore, Serbia must develop under the principles
of sustainable development, i.e. development harmonised and compatible with the
environmental, social and other policies of EU.
Serbia’s main development objective is the greater well-being of its population and a
dynamic economic growth, as a basic material prerequisite for improving the
standard of living and reducing unemployment and poverty at a faster pace. An
efficient market economy is aimed at improving the well-being of all citizens and is
possible only under conditions of fully democratised society supported by strong
state and social institutions and the rule of law.
The essence of Serbia’s economic development lies in promoting the overall
competitive capacity of its economy. This requires the resolute implementation of all
transitional and reform processes, activating development potentials of the country –
its human, material and natural resources – in order to make Serbia a fertile ground
for a faster development of the domestic private sector and a greater inflow of foreign
capital. The basic task of the state is, therefore, to create a sound market
environment (which means fully developing the market economy and system
prerequisites for its unhindered functioning) and to manage the fundamental GDP
aggregates – investment and consumption – in order to maintain internal and
external macroeconomic balance (the stability of prices and the balance of
payments). Only in these conditions Serbia can achieve the needed high average
annual GDP growth rates in the years to come. The key factors for achieving such
growth rates are a significant increase of exports and its restructuring and a rise of
foreign direct investment.
An exports revenue rise is the chief condition for servicing foreign debt and ensuring
the means for equipment and technology financing, which is, at the same time, the
condition for economic development in the following years. Attracting foreign direct
investment is one of the main prerequisites for modernising equipment and
production. Apart from capital, these investments bring modern technologies and
management to the country, ensure exports markets and activate the processes
promoting business operations of domestic enterprises. Attracting more FDI requires
an open economy and a sound market environment favourable for foreign investment
and domestic savings and for creating a critical mass of SME which will take over
workers from insolvent enterprises.
17
A high quality institutional environment is one of the inevitable preconditions for a
competitive economy and its sustainable development. A more efficient government
relies on the following principles: abiding by international conventions, openness,
transparency, responsibility, effectiveness and efficiency, ethics and confidence. The
main objective is to establish the responsibility of all institutions, in all fields, as well
as good regulations, which primarily depends on the judiciary and the modernisation
of administration as an important factor in promoting competitiveness.
For developing a market economy and democracy it is essential to ensure the
efficient functioning of the judiciary and public administration. This is why the
Government adopted a Strategy of Public Administration Reforms in the Republic of
Serbia in November 2004, in order to develop a democratic state based on the rule of
law, responsibility, public quality, cost-effectiveness and efficiency, and to establish a
public administration which would be at the service of citizens, capable of offering the
citizens and the private sector a high quality service at reasonable costs. The
Strategy is based on decentralisation, political neutrality, professionalism,
rationalisation and modernisation. Furthermore, at the proposal of the European
Integration Office and the Ministry of Public Administration and Local Self-
Government, in mid 2006 the Government adopted an Action Plan for Strengthening
Institutional Capacity for Assuming Commitments in the European Integration
Process. The Action Plan offers an overview of commitments related to European
integrations and supports the coordinated and planned strengthening of public
administration capacities to assume the commitments stemming from the EU
accession process. The document relies on the adopted Strategy of Public
Administration Reforms in the Republic of Serbia and the National Strategy for EU
Accession, precisely determines the priorities defined in the above mentioned and all
other relevant documents and establishes institutional measures for their
implementation.
One of the highest priorities in the democratisation of society is the security policy
reform, which has to be in accordance with internal democratic political changes and
transitional processes, changes in the international environment, reduced threats to
national security and different nature of those threats. This brings us to a particularly
important segment of democracy and the rule of law – army reforms. These reforms
must be implemented in the context of Euro-Atlantic integrations.
As for the political participation and representation of citizens, it is necessary to
intensify electoral legislation reforms in order to render domestic electoral system
18
compatible with international standards and to ensure that these laws are
implemented consistently, without ambiguities and drawbacks.
One of the greatest problems faced by almost all countries, particularly those in
transition, is certainly corruption6. Although some progress has been made in this
area, there is still much to be done to pass all necessary legislation and to ensure the
consistent and efficient implementation of adopted laws. Apart from these short-term
priorities, it is necessary to prepare medium-term priorities in this area, and to fully
harmonise domestic law with the UN Convention against Corruption and the relevant
conventions of the Council of Europe.
All the mentioned objectives of Serbia’s social development are aimed at meeting EU
requirements in the EU accession process, which means establishing stable
institutions guaranteeing democracy, the rule of law and the observance and
protection of human and minority rights.
The 2007 Memorandum on the Budget and Economic and Fiscal Policy, with
projections for 2008 and 2009, defines the following main objectives and priorities of
the 2007-2009 economic policy:
- creating conditions for maintaining medium-term macroeconomic stability, with the
stable national currency (dinar) and capped inflation;
- ensuring the accelerated implementation of economic and social reforms, ending
privatisation and restructuring of the economy;
- ensuring a high economic growth based on increasing domestic savings and
investment, foreign direct investment and exports, simultaneously reducing the
deficit of current foreign transactions;
- Increasing employment and promoting the standard of living.
Measures envisaged in order to implement these objectives are a strict monetary and
fiscal policy, tight wage policy in the public sector, speeding up privatisation and
restructuring social and public enterprises, completing system laws and their
harmonising with EU legislation, accelerating institutional reforms, including the
reforms of public administration, the judiciary, police and local self-government.
There are also numerous measures envisaged in all fields of economic and sectoral
policies.
6 Intersectoral consultations include the Government’s Action Plan on the Fight against Corruption.
19
1.4. Growth projection and the needs for international assistance
Basic macroeconomic indicators are integrated in the structural model; under this
model, through setting the value of the targeted variable (as an exogenous variable)
we derive the values of endogenous variables which are economic policy indicators.
There are targeted and derived variables which may alter their character or role, but
the values of some targeted variables were set based on the analysis of successful
transitional experiences.
The main indicators integrated hereby are as follows:
- prices;
- exchange rate and inter- currency relations;
- gross domestic product (GDP), calculated on the production side (as an aggregate
of gross value added and taxes reduced by subsidies);
- aggregates of GDP use; overall domestic demand, final domestic demand,
consumption (personal and collective), investment (overall and fixed), net exports
(trade and service balance);
- deflators of GDP and aggregates of use;
- current balance of payments transactions and elements of their structure: exports
and imports of goods and services, with the de-aggregation into goods and
services and their balances; factor transfers (interest rates); current transfers;
- capital transactions balance and its basic structure;
- foreign exchange reserves change as an element of the balance of payments;
- stock of foreign exchange reserves and debt;
- investment balance (in the sense of the source of savings from which they are
financed), etc.
20
Target variables are as follows:
Investment: The optimal investment level could not be established proceeding from
the classical production function, because the functionality and market value of the
inherited fixed assets cannot be determined. In this context, the experience of
successful transitional countries was taken into account (Estonia, Poland, the Check
Republic, Hungary and Slovenia, which increased the share of investment in GDP to
25-30%7). Estimates of the overall investment also include the resources planned
under the National Investment Plan. The final objective is for fixed investments to
reach the level of 23% of GDP by 2009 (i.e. 26.5% of GDP for overall investment).
This requires an average fixed investment growth rate of 15.7% in the observed
period).
Exports of goods and services: In 2005 the share of exports of goods and services
in GDP amounted to 25.4%. The targeted share of exports in GDP in the last
observed year (2009) is 32% and is gradually rising.
Imports of goods and services are a direct function of two target variables –
exports and a deficit of goods and services. Between 2007 and 2009 imports should
rise at the annual rate of 15.3% on average.
Net exports (balance of goods and services): The trade balance deficit is the chief
generator of the deficit of the current balance of payments transactions in the
Republic of Serbia (20.4% in 2005). The objective is to successively reduce the
share of goods and services deficit in GDP to 18% in 2009.
Public (collective consumption): Under this projection, the targeted share of public
(collective) consumption should be reduced from 20.8% in 2005 to 14.4% of GDP in
2009.
Inflation should drop from estimated 8% in 2006 to 5% in 2009.
Collective consumption, which includes current operational expenses of public
services (education, health, culture, the army, public administration), must be
reduced from 20.8% of GDP in 2005 to 18.9% of GDP in 2009.8
Big system and structural changes are a precondition for implementing the
projections. In other words, the precondition is to implement the measures defined by 7 Unlike these countries, the countries in which this share was under 20% tended to undergo the second transitional recession. The share of 18-20% is typical of developed countries. 8 Working assumptions are: Inflation (increase of retail prices as compared to the end of the previous year): according to the Republican Statistics Office, 17.7% in 2005, 8% in 2006, 8% in 2007, 7% in 2008, 5% in 2009. Dollar exchange rate in dinars (end of the year): 67.4% in 2005; 66.5% in 2006; 68% in 2007; 73.3% in 2008, 76.1% in 2009. Real GDP growth: 4.8% in 2005; 6.2% in 2006; 6.63% between 2006 and 2009.
21
the National Economic Development Strategy 2006-2012. The key prerequisites
(risks) for implementing the projections are as follows:
- High annual inflow of foreign direct investment; for this to happen, a favourable
business environment must be created for foreign investors, which means, among
other things, an overall risk reduction.
- Very ambitious exports growth rates, as envisaged; they have to be higher than
imports growth rates. It is quite clear that the realisation of this objective means
structural changes and increased competitiveness of the economy.
- A change in the GDP structure, as necessary, meaning an increase of investment,
including the development use of both privatisation proceeds and the resources
under the National Investment Plan, at the expense of consumption.
Nominal GDP values were derived from the 2004 values (the Republican Statistics
Office), through GDP real growth and deflators (derived from domestic prices and
foreign trade deflators), weighted by net exports (through Euro exchange rate).
Special domestic demand deflators were taken into account and within them
investment and consumption deflators (the personal consumption deflator is an
average growth of retail prices).
Table 4: GDP projections and components 2005 2006 2007 2008 2009
GDP in millions of current US$ 25972 32221 35898 38914 42527 Real GDP growth 4.8 6.2 5.9 6.9 7.1 GDP, current prices, in billions of dinars 1,750.0 2,142.0 2,477.4 2,854.2 3,237.2
Domestic demand 2,106.8 2,577.6 2,948.1 3,382.3 3,820.0Consumption 1,607.6 1,947.1 2,247.6 2,535.3 2,814.0
Household consumption 1,242.4 1,499.9 1,757.5 1,982.0 2,199.4State sector consumption 365.2 447.2 490.1 553.3 614.6
Investment 393.7 482.0 582.2 713.6 857.9 Gross fixed investment 302.0 392.0 495.5 613.7 744.6 Stock change 91.7 90.0 86.7 99.9 113.3
Net exports of goods and services -356.8 -435.6 -470.7 -528.0 -582.7 Net exports, share in GDP -20.4 -20.4 -19.0 -18.5 -18.0 Consumption, share 91.9 90.9 90.7 88.8 86.9 Consumption, real growth 2.1 6.8 6.6 4.6 4.8 Personal consumption, share 71.0 70.0 70.9 69.4 67.9 Public consumption, share in GDP 20.6 20.2 19.8 19.4 19.0 Domestic demand, real growth 0.5 8.2 5.8 6.3 6.6 Domestic final demand, real growth 2.2 8.3 8.5 6.4 6.7
Investment, share in GDP 22.5 22.5 23.5 25.0 26.5 Share of fixed investment 17.3 18.3 20.0 21.5 23.0
22
Investment, real growth rate -14.7 9.3 12.5 13.5 13.5 Fixed investment growth rate 2.4 15.8 17.7 14.7 14.6 Overall GDP balance -5295 -6552 -6821 -7199 -7655 US$/Dinar exchange rate 67.4 66.5 69.0 73.3 76.1 Table 5: Some elements of the balance of payments projection
2007 2008 2009 Exports of goods and services 10335 12501 15245 Growth rate of exports of goods and services 1.24 1.21 1.22 Imports of goods and services 17155 19700 22899 Growth rate of imports of goods and services 1.15 1.15 1.16 Balance of goods and services -6821 -7199 -7655 Balance of interest rates -510 -987 -1015 Net current transfers 3549 4231 4460 Current account balance -3309 -3542 -3832 Long-term commercial loans- inflow 3202 2302 2413 Conssesion loans – inflow 300 200 200 Long-term loans – payment 1990 2302 2824 Short-term lines – net 250 250 250 Direct investment- net 2435 2432 2817 Foreign exchange reserves – changes 1248 0 -699 Table 6: Macroeconomic balances – Savings and investment balance
2005 2006 2007 2008 2009 1. GDP (billions of dinars), current prices 1750.0 2142.0 2477.4 2854.2 3237.2 2. GDP (millions of US$), current rate 25972 32221 35898 38914 42527 3. Inflation (RPI) – end of period 17.7 8.0 8.0 7.0 5.0 4. GDP (growth rates) 4.76 6.2 5.88 6.87 7.09
Share in GDP 5. Gross domestic savings (7-6) 2.1 2.2 4.,5 6.5 8.5 6. Net factor receipts and transfers from
abroad 11.8 9.0 9.8 9.4 9.0
7. Gross national savings 13.9 11.1 14.3 15.9 17.5 8. Gross domestic investment 22.5 22.5 23.5 25.0 26.5 9. Foreign savings, without donations (8-7) 8.6 11.4 9.2 9.1 9.0 10. Foreign savings, including donations 9.8 12.2 10.5 10.2 9.9 11. Donations (10-9) 1.2 0.8 1.3 1.1 0.9
Macroeconomic projections showed that Serbia has a chance to achieve relatively
high growth rates (6.63% on average) in the observed period, thus catching up with
the advanced transitional economies which are now members of the European
Union. Achieving this goal will not be easy at the least; it will require considerable
effort and sacrifice. That means that it will be necessary to reach extremely high
export growth rates of over 20%. At the same time, it will be important to slow down
import growth and to achieve an average import growth rate of 15.3% in the
observed period.
23
The most critical factor will be investment, which should reach the level of 26.5% of
GDP in the observed period. The average annual investment growth rate in the
observed period should amount to 13.2%. This figure will be impossible to reach from
domestic sources; in order to do that foreign savings (loans and grants) of 10.2% of
GDP on average will be needed (row 10, table 3).
The following are needed donations: 1.3% of GDP in 2007, 1.1% of GDP in 2008 and
0.9% of GDP in 2009, or, calculated in absolute amounts, the overall needed
donations amount to 1276 million US$ (466 million US$ in 2007, 428 million US$ in
2008 and 382 million US$ in 2009). The model showed that in the following three
year period the estimated realisation of long-term loans amounts to 8.6 billion US$,
with the share of concession loans of around 700 million US$. This means that the
required international assistance to the Republic of Serbia in the next three year
period is estimated at 1.98 billion US$ (700 million US$ of concession loans and 1.28
billion US$ in donations). The table below shows the structure of the needed
international assistance disbursement by years.
Table 7: Structure of needed international assistance by years – disbursement (in millions of US$)
2007 2008 2009 2007-2009 Grants 466 428 382 1,276 Concessional loans 300 200 200 700 Total 766 628 582 1 976 Table 8: Difference between estimated needed grant disbursement and estimated disbursement of grants approved by 2006
(in millions of US$) 2007 2008 2009 2007-2009 Estimated needed grant disbursement 466 428 382 1.276
Estimated disbursement of grants approved by 2006
390 279 204 873
Difference 76 149 178 403
The table above shows an overview of the annual amounts of disbursement of
international assistance to be achieved in order to reach the projected GDP and
investment growth, as well as the estimated/expected realisation of resources
approved/agreed by 2006. The difference between these two categories is the
required disbursement for which international financing sources have not been
24
identified and which should be covered from new allocation of multilateral and
bilateral donors in the observed period.
However, Serbia’s needs for international assistance cannot be limited to the
observed amount because there are needs for investment in specific fields which the
macroeconomic model per se cannot quantify, i.e. which do not affect GDP growth.
An entire range of variables, e.g. investment in environmental protection and similar,
have a long-term positive effect on GDP growth, but these positive effects cannot be
manifested in the short-term but in the long-term, which is why their time horizon is
beyond the projection showed in this model. At this point it is important to point out
certain specificities of international assistance to Serbia to be extended in the
following years: as the transitional changes of legislation have largely been realised,
it is necessary to strengthen the capacity of the state structure in order to implement
the new legislation; the adoption of the new Constitution created conditions for further
decentralisation (specific regulations thereon have already been adopted), which
means that local capacities must be strengthened, while the new Constitution
imposes further harmonisation of regulations with the new constitutional
arrangements; it is essential to implement activities aimed at promoting the quality of
life and alignment with EU standards, particularly in environmental protection (the
activities are not quantified by this model).
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2. INTERSECTORAL PRIORITIES FOR INTERNATIONAL ASSISTANCE
26
2.1. Employment Generation– Economic Development and Education in the function of Increasing Employment
In 1990’s the Republic of Serbia completely collapsed, both economically and
socially, and the development of its economy came to a standstill. GDP dramatically
dropped by some 50%, while wages, pensions and other benefits fell enormously as
a consequence of an authoritarian policy, international isolation and severe
sanctions, the disintegration of the former SFRY’s market, wars in the neighbourhood
and the shelling of Serbia in 1999. The economy was in a very poor state,
enterprises did not have sufficient resources even for maintaining their capacities and
there were no new investments. Due to international isolation, Serbian enterprises
lost their export markets, which they could not win back even when the sanctions
were lifted since they were not competitive as compared to enterprises from other
transitional countries. This resulted in a big rise of unemployed in the overall
population. The situation further deteriorated with the arrival of nearly 700,000
refugees and internally displaced persons from B-H, Croatia and the Autonomous
Province of Kosovo and Metohija, which accounts for almost 10% of Serbia’s
population.
After democratic changes in Serbia in October 2000 citizens faced the long hidden
truth on the gravest economic and social crisis in recent history. Under such
extremely unfavourable conditions, the democratic government had to launch
intensive legal, economic, financial and social reforms, with a clear intent to
compensate for the years-long lagging behind in implementing transitional processes
and establishing a market-oriented economy and a democratic political system. Many
of these processes, above all the restructuring of economy, shutting down of
companies with great and irrecoverable losses, adjusting to tough conditions of
international competition, are quite complex, opening new social problems and
generating new poverty forms and new regions of poverty, since they inevitably lead
to unemployment.
At this point, unemployment is one of the greatest Serbia’s economic and social
problems. The overall number of persons seeking employment in 2005 was 991,807,
while, according to the Labour Poll9, the unemployment rate was 20.8% or 21.8%
(persons of working age – from 15 to 64 years of age). This situation is a direct result 9 There are two unemployment rates based on different sources – the internationally comparable Labour Poll of the Republican Statistics Office and the records of the National Employment Service. Bearing in mind the fact that the figures from the Labour Poll are internationally comparable, it was this source that was used for the purposes of this text.
27
of the fall of production in 1990’s and of the use of the labour market for solving
social problems by employing more workers than was really needed. Moreover,
restructuring and privatisation have led to even higher unemployment within a short
time period. At the same time, there is a need to improve economic efficiency and
transform Serbia’s economy into a competitive, market-oriented and knowledge-
based economy.
The problem of unemployment worsened in the transition period, as shown in Table
8. The indicator showing that Serbia’s unemployment rate has been incessantly
rising since 2001 is particularly unfavourable. The unemployment rate is relatively
high when compared to the EU member countries (with the average unemployment
rate of 8.7%) and with some neighbouring countries, like Croatia and Bulgaria (with
the average unemployment rate of 13.8% and 9.9% respectively). In addition, during
economic restructuring, “hidden” unemployment has come to the surface, while
ownership transformation has led to faster dismissal of labour. Serbia has not fully
completed the process of privatisation or restructuring of the selected enterprises.
The completion of this process imposes an extremely difficult additional task upon
the state – in other words, in order to fully eliminate social ownership, enterprises
which are not privatised will end up as state property and the state will have to make
a tough choice – to close down unprofitable enterprises and sell their assets (whose
value cannot be significant), thus additionally increasing unemployment. Although
Serbia has high economic growth rates, they are still insufficient to solve
unemployment problems faster and more successfully. It is for these reasons that further growth of unemployment and high poverty rates are expected in the following period, which will be particularly pronounced in some regions. According to the World Bank studies for 2005, at this moment 800,000 people or
10.5% of the population in Serbia live beyond the poverty line. These indicators could
become even worse, in view of the fact that a large part of Serbia’s economy has not
been privatised yet; there are 5,000 different enterprises employing 630,000 workers
to be privatised in the future. This means that a new big challenge for Serbia will be
to prevent new poverty arsing from the economy’s restructuring. With the existing
institutions and economic structure, it will be difficult to endure the strong social
pressure of new unemployment. Moreover, in the years to come, the overall
reduction of unemployment will largely depend on a considerable increase of
investment in the private sector, for the new employment rate to be higher than the
dismissal rate resulting from restructuring.
28
Table 8: Unemployment rate between 2000 and 2005
2000 2001 2002 2003 2004 2005
Unemployment rate according to the National Employment Service (%)
25.6
26.8 29.0 31.7 31.7 26.8
Unemployment rate according to the Labour Poll (%)
12.1 12.2 13.3 14.6 18.5 21.8
The unemployment rate calculated according to the figures of the National
Employment Service (26.8%) is significantly higher than the figures from the Labour
Poll (21.8%). This can be explained by different definitions of employment and
unemployment, as well as by the fact that the records of the National Employment
Service also include the persons who are not actively seeking employment and who
get registered only to have access to other social benefits. On the other hand, the
figures from the Labour Poll10 include in the category of the employed the persons
working in the informal sector11.
Not only is the number of the unemployed in Serbia high, but it is their structure that
is very unfavourable as well, being characterised by the following:
- a high share of long-term unemployment of around 79% in the overall
unemployment; there is a danger for these persons to become inactive in
seeking employment, thus being an additional burden for social funds.
Moreover, long-term unemployment leads to obsolete knowledge and skills.
Due to long-term unemployment and the bad system of life-long education,
some 30% of qualified labour is not competent enough to do their jobs,
particularly in the case of those who have a little or no work experience at all;
- a high share of young people in the category of the unemployed; the
unemployment rate for young people (15-24 years of age) amounted to
10 It is considered that the National Employment Service’s figures overestimate real unemployment since the persons working in the informal sector, in other words persons who are not unemployed, are strongly motivated to register with the National Employment Service- to exercise the right to health security, various social benefits, etc. On the other hand, the figures from the Labour Poll underestimate unemployment since even those who work only an hour a week are considered employed. It would be probably correct to consider these two unemployment rates as the upper and the lower limit of real unemployment in Serbia. 11 The division into the formal and informal sector is used in this document under the National Employment Strategy.
29
47.7% in 2005, which is even three times higher than the average
unemployment of this age group in the EU (around 18.5%). This potentially
means their leaving the country and going abroad, particularly in the case of
young people with university degrees;
- a relatively high share of unqualified people in the overall unemployment;
persons with secondary education, who account for some two-thirds of the
overall number of the unemployed (66%), have the biggest share in the
overall unemployment in Serbia. In addition, persons with elementary
education account for 19.4% of the overall unemployment;
- a relatively high share of unemployed women; women account for some 55%
of the overall unemployment- in other words, female unemployment rate is
27.4% as compared to the male employment rate of 17.6%. Furthermore,
persons belonging to this category have low wages due to lower qualifications
and short years of service.
Under the Poverty Reduction Strategy, the most vulnerable population categories are
refugees and internally displaced persons (some 500,000 people), the Roma (around
108,000 people) and the handicapped (around 350,000 people). These three
vulnerable categories include nearly one million people and their common
characteristic is wide unemployment and insufficient educational level. Until October
2000 these population categories had not been given adequate attention, partly due
to material problems, but partly as a result of negligence; in other words, their human
rights were neglected and as a result their problems have multiplied in time.
Therefore, the third objective of the Poverty Reduction Strategy is the efficient
implementation of the existing and the definition of new programmes, measures and
activities to enable equal access to employment, education, health and utility
services for these categories of people.
Weak job opportunities and a general economic and social decline resulted in great
migrations of the youth to other countries in 1990’s, but also after the year of 2000. At
this point, there is a huge “demographic hole” in Serbia in the population between 25
and 35 years of age, which is the most vital part of the population, since many young
people of that age left the country to live abroad. A particular problem in all that is the
migration of high quality people – around 20% of the best students leave Serbia in
the course of their education or afterwards; some of them leave the country after
elementary school, but most of them do it after secondary, post-secondary or
university education. A very small part of them ever return to Serbia.
30
The share of the self-employed in the overall employment is very low – about 5%,
which is considerably lower than that in advanced transitional countries (over 10%) or
in developed countries (OECD- around 15%). The reason for this is a relatively low
level of development of small-size and medium-size enterprises and a high level of
“grey” employment in them. Apart from that, there is a very low share of flexible
employment forms (e.g. part-time employment, temporary employment)- 1% in the
overall employment, although they could be an important employment channel for
women and the youth, the categories which suffer the adverse effects of
unemployment more than any other category of the population. Finally, it should be
said that the employment rate of people between 30 and 49 years of age is some
75%, which means that in Serbia every fourth inhabitant of the most productive age
is unemployed.
Due to meagre possibilities to find employment in the formal sector, a large number
of people have found jobs in the informal sector in order to earn their living.
Estimates on the share of grey economy in GDP differ a great deal, ranging from
25% to 45%. Some of the people employed in the informal sector are faced with
uncertainty, absence of pension and health security, while the state is deprived of a
considerable portion of tax revenues.
The main problems and, at the same time, challenges in the labour market should be
seen from two aspects. Firstly, the insufficient inflow of foreign direct investment
affects the number of new jobs, leading to weaker labour demand as compared to
labour supply. Secondly, there is structural incompatibility in the labour market and
the educational system is not harmonised with economic needs.
Furthermore, in addition to high unemployment, some of the key characteristics of Serbia’s labour market are high hidden unemployment, a low share of employment in the private sector and a very low mobility of labour. Since 2001 many jobs have been abolished in the enterprises undergoing
privatisation and having surplus labour. Apart from that, many employed people are
only formally employed as they work in the enterprises which still exist only owing to
the slow process of restructuring and the state budget subsidies. There are around
100 such enterprises (including dependent ones), with over 120,000 workers. Most of
them are so-called “big systems” that are essential for the towns or entire regions in
which they are located. Only 15 such enterprises have been restructured or sold so
far (including dependent enterprises in the “system”). At the same time, the new
private sector, which could absorb surplus labour, has not been strengthened. The
slow development of new companies is due to an investment climate which is still not
31
favourable enough – i.e. due to slow transition, regulatory and economic-political
weaknesses, as well as big outstanding political issues, such as state borders,
cooperation with the Hague Tribunal, etc. In view of that, it could be concluded that
employment will significantly drop in the next period – when restructuring intensifies
and enterprises start dismissing surplus labour more radically.
Formal education does not enable people to acquire necessary skills in order to be
immediately included in the work process as the newly employed. This means that,
on the one hand, huge budget resources are spent, while on the other, companies
invest time and money in training programmes, additional training and in including
the newly employed in the work process, which makes labour either less competitive
or more expensive due to required additional qualifications. A situation like this also
leads to a supply and demand imbalance in the labour market. The reason for this
primarily lies in insufficient coordination between the educational system and the
labour market needs, particularly in the case of secondary vocational education.
There is also a problem of obsolete skills after years-long unemployment. It is
necessary to alter and define educational profiles to make them compatible with
changed economic needs and to enable the acquisition of practical skills. Unless this
is done, persons that complete formal education12 might find it impossible to get a job
because they lack necessary knowledge and skills. In the process of educational
reforms all social partners must act jointly and with responsibility: educational
institutions, the state, employers, employers’ associations, the non-governmental
sector and other stakeholders. An efficient system of education and life-long learning
could contribute most to this goal. In the widest sense, traditional boundaries
between academic knowledge and professional-technical skills, formal and informal
education, vocational training, etc, should be eliminated.
Furthermore, a low and inadequate level of education has been identified as one of the main reasons for poverty in the Republic of Serbia. Therefore, there are two essential things to be done: to increase employment opportunities by improving the educational level of the population and to promote the efficiency of the educational system by adjusting it to the labour market needs.
Consequently, the economy will be more competitive, which will create new jobs and
promote the standard of living. The chief factors of competitiveness in the global
economic development are knowledge and its implementation, which, again, ensures
innovative products, processes and services. In addition to the reforms of education
12 Informal education (state and private) includes training, seminars and courses.
32
and the employment policy, one must not forget the need for continued support to
projects linking the economy and the development sector and promoting research in
this connection, strengthening the infrastructure to make this link possible (business
incubators13, technological parks, technical relay centres), or the need for incentives
aimed at improving the innovative basis in the corporate sector itself. Under a recent
study, resources allocated for research and development in enterprises amount to
0.13% of the turnover and are mostly used for purchasing new equipment and
organising training on its application. The development of new products, processes
and services is negligible. It is necessary to encourage projects which will support
enterprises in technology transfer, in developing new products, processes, services,
organisational methods and structures, as well as instruments for horizontal and
vertical linking of enterprises aimed at strengthening their capacities to increase
innovativeness and productivity (clusters).
In the previous period, the Government adopted a series of measures and activities
aimed at promoting employment. The most important strategic document addressing
this problem is the National Employment Strategy- 2005-2010. On the basis of this
Strategy, a National Employment Action Plan (NEAP) for the period between 2006
and 2008 was adopted to establish operational measures for implementing the
National Employment Strategy. Under the NEAP, the Government plans to realise
the following already initiated measures by the end of 2006:
- activities related to the “Job Club” and job seeking programmes for almost
76,000 persons,
- programmes of further education and training for 12,800 unemployed
persons,
- subsidies for 6,100 volunteers who wish to employ trainees,
- training organised by the Labour Market for over 6,000 unemployed persons,
- employment and entrepreneurship development programmes for 8,000
persons,
- entrepreneurship training course for almost 1,500 unemployed persons,
- self-employment and subsidy-supported programmes for over 4,000 persons,
- regional programmes for 2,500 unemployed persons,
13 A form of support for small-size and medium-size enterprises, which means professional and financial assistance in setting up and developing such enterprises up to the point when they become ready to participate in the market independently
33
- subsidies for employing 200 handicapped persons, and
- public works for 3,000 unemployed persons14.
With organising basic functional adult education and co-financing the employment of
graduates, the overall number of unemployed persons that could be offered to
participate in activation programmes will rise to 100,000. In 2006 the Government
allocated 1.3 billion dinars for the labour market active policy measures. Resources
earmarked for active employment measures in Serbia account for 0.07% of GDP,
which is ten times lower as compared to developed countries; it is, therefore,
necessary to increase the share of international assistance to be able to efficiently
implement these measures. Direct employment growth measures will be related to
tax relieves for employers, more favourable financing of small-size and medium-size
enterprises and entrepreneurship, tax reduction based on social insurance expenses
paid by the employer. In 2005, the National Parliament adopted a new Labour Law
which retained the flexibility of the former law while introducing certain benefits for
the employed, such as larger severance pay for dismissed workers, more
complicated dismissal and payroll accounts procedures. In the next period, new
provisions regulating different forms of labour should be incorporated in the Labour
Law – part-time jobs, employment for a specified time period, temporary jobs,
working for several employers, etc.), which would have a positive effect on
employment growth.
Apart from that, a Strategy of Changing the National Employment Service (NES) for
the period between 2005 and 2008 was adopted. Under this document, there are
three vital objectives to be implemented by 2010: to develop a client-oriented service,
to decentralise the NES, to develop the monitoring and evaluation of the measures
and activities aimed at higher employment, to promote an adequate labour market
information system. The Poverty Reduction Strategy defines national priorities –
among other things, faster employment and better access to education as
instruments in reducing poverty. The Development Strategy for Small-Size and
Medium-Size Enterprises envisages an increase in the number of these enterprises
from around 270,000 (2003) to 400,000 by late 2008.
The unemployment problem can be settled only through creating new jobs, adjusting
labour supply to modern production requirements and through improving the quality
of work. Increasing foreign direct investment will have a particularly strong effect on
the growth of employment. As of October 2000 to date, the overall value of foreign
14 Source: www.espserbia.org
34
direct investment has exceeded 7.6 billion US$, with the largest inflow (some 50% of
the overall inflow) in 2006. Due to the promoted investment climate, a larger inflow of
greenfield investment, which is the main factor in generating new employment, is to
be expected in the years to come. In order to attract the investment of the diaspora,
the Ministry for Diaspora was set up, among other reasons, to motivate our fellow
countrymen living and working abroad to invest money in projects in the Republic of
Serbia. The future establishment of a free trade zone in South-East Europe may also
affect the employment growth, as it will prompt trade and investment. A large number
of people will have to be trained to work in a new privatised economy, holding posts
in a changed production and service sector. Larger resources should be allocated for
the training and education of under-qualified labour and for the additional qualification
of employees of small-size enterprises, since they do not have enough resources to
do that on their own. Significant economic and social interventions will be needed,
particularly in the regions with an outdated economic structure and markets with no
perspective. Considerable financial resources are a necessary but not sufficient
precondition.
This is why a sufficiently high GDP growth rate will have to be achieved in the years
to come, to enable bigger labour supply. It is important to stress that in order to solve the unemployment problem, there has to be coordination of educational, social, tax, cooperative, regional and other policies.
Priority objectives in this field in the medium-term are as follows:
- strengthening active employment measures;
- strengthening labour market institutions; in coordinated efforts of all
stakeholders, the employment service should be reformed to ensure a better
quality service to unemployed persons and employers;
- reducing and preventing long-term unemployment;
- reducing the share of the youth in the overall unemployment;
- increasing the employment of vulnerable groups and ethnic minorities (the
handicapped, the Roma, refugees and displaced persons) through special
programmes intended for these groups;
- promoting different forms of labour (part-time jobs, employment for a specified
time period, temporary jobs, working for several employers, etc.) in the overall
employment;
35
- overcoming lack of coordination between education and the labour market
needs;
- promoting the quality of education;
- motivating the youth for professional development and additional education
and harmonising local degrees and qualifications with international standards,
as well as diversifying institutional forms and models and programmes and
methods of work;
- reforming the curricula in order to accommodate functional, computer and
technological literacy requirements;
- including vulnerable groups and persons with special needs in the
educational system;
- developing an educational system based on the philosophy of life-long
education.
In order to realise the above objectives, strong international support is needed.
In this context, priority measures/activities through which these objectives should be
realised in the medium-term were defined.
Table 9: Priority measures/activities aimed at implementing medium-term objectives in
promoting employment and reducing the unemployment rate Objectives Measures/activities
Implementing active employment measures and encouraging the development of the private sector
- reducing surplus labour through severance pay, training and self-employment;
- strengthening local-regional structures for the development of small-size and medium-size enterprises and entrepreneurship;
- developing industrial parks; - setting-up and supporting business
incubators; - elaborating, adopting and implementing
the national economic development strategy;
- ensuring loans for the development of economy (micro-credits, loans directed through the Development Fund), and especially establishing a start-up credit fund;
- attracting foreign investment (establishing a fund for encouraging foreign investment, removing obstacles to foreign investment);
- incentives for increasing competitiveness, productivity and export performance of enterprises;
36
- employment within public works; - transforming passive measures into active
ones (the voucher system, etc.); Strengthening labour market institutions - implementing the Strategy of Changing the
NES for 2006-2008); - developing an employment information
system; - developing professional guidance and
counselling centres for unemployed persons;
- establishing and strengthening local employment councils;
- establishing a single records system in the field of labour and employment;
Reduction and prevention of long-term unemployment
- subsidies for employing specific categories of unemployed persons amounting to the value of contributions for mandatory social insurance paid by the employer;
- strengthening cooperation between the NES and employers in order to establish the number and structure of vacancies and to include long-term unemployed persons in active employment seeking programmes.
Increasing the share of the youth in overall employment
- implementing the Youth Employment Action Plan between 2007 and 2009
Increasing employment of vulnerable groups - implementing the National Employment Action Plan for 2006-2008, with a special emphasis on risk categories (women, older than 45/50, the handicapped, refugees, displaced persons and minorities);
- increasing capacities of enterprises for training and employing handicapped persons in the labour market.
Encouraging various labour forms - establishment and operation of organisations (agencies) for temporary employment
Reforming secondary and post-secondary education in order to overcome lack of coordination between education and labour market needs
- rationalisation and regionalisation of secondary vocational schools network;
- defining a system through which new profiles will be introduced;
- defining the system of practical work in secondary vocational schools.
Reforming higher (university)education and implementing the Bologna Declaration
- establishing a National Agency for European Educational Programmes;
- implementing specific programmes of the Agency;
- developing and promoting cooperation with international educational institutions.
Improving the quality of education - reforming and rationalising the curricula; - establishing quality standards in research
and teaching; - technical modernisation of the educational
infrastructure. Developing an educational system based on the concept of life-long education and improving the adult educational system
- stimulating employers to invest resources in promoting the skills of their employees;
- developing re-qualification, re-education and training programmes, particularly for surplus labour within the restructuring
37
process. Including vulnerable groups or ethnic minorities and persons with special needs in the educational system
- implementing projects and programmes aimed at supporting the Roma integration in the local community;
- implementing specific seminars and training for teachers to instruct them how to work with children with special needs;
- elaborating strategic documents, laws and by-laws under international standards.
Stable functioning of the educational system - establishing and implementing a new model of financing of educational institutions;
- developing an autonomous private sector in education.
In order to implement the mentioned measures/activities, it is necessary to ensure
cooperation and coordinated work of the Ministry of Economy, the Ministry of Labour,
Employment and Social Policy, the Ministry of Finance, the Ministry of Education and
Sports, the National Employment Service and of other relevant institutions at the
central and local level. At this moment, Serbia has limited resources in its budget for
implementing the above activities, so that international financial assistance will be of
vital importance in this sense.
2.2. Building and strengthening institutional capacities
Over the past five years of the implementation of social and economic reforms in the
Republic of Serbia, the insufficient capacity of the public administration appeared as
a bottleneck in this process, for it was not strong enough to meet the growing
demands in the field of economic and social reforms and was more of an obstacle
than an incentive to faster economic and social development and the EU accession
process. The most usually stated reasons for inefficiency and bureaucratic obstacles
were the following: inadequate legal structure, the absence of regulatory bodies, a
poorly educated, underpaid and unmotivated public administration, the lack of
communication and dialogue between the authorities and a private sector in the
making. A strong and efficient public administration is also needed in order to provide
the necessary legal framework and ensure the implementation of key development
goals, namely, democratisation of society, development of civil society and non-
governmental sector and respect for human and minority rights. The reform of public
administration in other countries in transition also lasted longest, but the Republic of
Serbia, being the last to embark on this process, must make it an imperative to
implement changes rapidly.
38
Building and strengthening institutional capacities is a prerequisite for the Republic of
Serbia to achieve the majority of its strategic goals that can be summarised in the
overall economic development, establishment of the rule of law and the increase of
social wellbeing in the forthcoming period, as well as successful implementation of
the European integration process. For that purpose, at the proposal of the European
Integration Office and the Ministry for Public Administration and Local Self-
Government, the Government adopted in mid 2006 an Action Plan for the
strengthening of institutional capacities in order to enable them to assume their
commitments in the European integration process. The aim of the Action Plan is to
offer a comprehensive overview of all priorities and to support a coordinated and
planned strengthening of public administration capacities for assuming the
commitments stemming from the EU accession process. This document is building
on an already adopted Public Administration Reform Strategy in the Republic of
Serbia and the Serbian National Strategy for the Accession to the EU and its aim is
to concretise priorities defined in this and other relevant documents and in
establishing institutional measures for their implementation. The document takes as a
point of departure the existing legal and institutional framework and the reform
measures already taken. For that purpose, the key laws and by-laws concerning the
public administration system adopted by the end of 2005 are listed, the most
important of which are: The Law on Government, The Law on Public Administration,
The Law on Civil Servants, the Law on Public Agencies, the Law on the Protector of
Citizens, the Law on the Prevention of the Conflict of Interests in Discharging Public
Offices, The Law on Free Access to Information of Public Importance and other,
followed by a number of by-laws for the purpose of their concretisation and
implementation. All these laws along with some other have provided for the
establishment of an adequate legal framework that enables the pursuit of aims of
building up a professional, depoliticised and decentralised public administration. The
Public Administration Reform Council supervises the reform of public administration.
It is chaired by the Prime Minister and its members are: Vice Prime Minister, Minister
for Public Administration and Local Self Government, Minister of Finance, Minister of
Justice, Minister of the Interior and the Director of the Republic Secretariat for
Legislation. At the operational level, the management of the public administration
reform is entrusted with the Ministry of Public Administration and Local Self
Government.
With regard to future activities to be carried out in connection with strengthening
institutional capacities, the most important ones will be those concerning the
39
completion of legislative reform, further reform of public administration as well as
strengthening institutional capacities across all ministries, directorates and
specialised organisations forming the system of public administration.
Legislative reform primarily implies harmonisation of domestic regulations with the
EU legislation. It is, therefore, necessary to adopt a series of reform-oriented laws in
all fields. In February 2005 the Government adopted its third Action Plan for the
harmonisation of the Republic of Serbia’s regulations with those of the European
Union. The Action Plan envisaged harmonisation of 41 laws either by adopting new
ones or by amending the already existing ones. However, this process is rather slow.
Out of the envisaged 41 laws to be harmonised according to the 2005 Action Plan,
the Government adopted 14 and the Parliament 10 by the end of 2005. In addition to
a slow progress in law adoption, it should be pointed out that the harmonisation
process does not end with the adoption of new laws that are formally or normatively
sufficiently harmonised with the EU regulations, but it is also necessary to provide
conditions and institutional capacities for their implementation or enforcement
through the judicial or administrative bodies. In order to speed up the harmonisation
process, it is necessary to continue the already initiated systematic translation of
acquis communautaire, improve harmonisation mechanisms (i.e., introduce other
mechanisms in addition to the Statement on Approximation) and ensure a continuous
support to the law implementation (namely, by strengthening certain institutions,
providing training courses for the employees etc.) The Action Plan for Harmonisation
with the EU Legislation for 2006 was adopted on 29 March 2006 and it contains a
table of 43 laws whose adoption is recommended by the European Partnership, as
well as the laws contained in the 2005 Action Plan that had not been enacted and
those that, according to the opinion of line ministries, constitute a priority for current
year in the process of harmonisation with the EU legislation. The Plan contains an
explanation of the necessity to draft new laws, determines the ministries responsible
for their drafting, sets an approximate deadline for the Government to adopt these
draft laws and states the names of persons directly responsible for drafting the text of
each particular law.
The upgrading of the public administration system in the Republic of Serbia is carried
out in keeping with the adopted laws and by-laws and the Public Administration
Reform Strategy for the Republic of Serbia. The Law on Public Administration
ensures the implementation of all key principles contained in the Public
Administration Reform Strategy of the Republic of Serbia while the Law on Civil
Servants regulates the status of civil servants and defines specific duties, rights and
40
responsibilities and principles for the beginning and termination of employment. The
Law on Civil Servants has provided for the establishment of a High Civil Service
Council as a body that should determine the knowledge and skills required for the
work in public administration, as well as the manner of their verification, and should
define a code o conduct for civil servants. A Decree on the establishment of a Human
Resources Office assigned with the management of human resources and the
development of civil service system as a whole has been adopted. The Public
Administration Reform Strategy in the Republic of Serbia, as adopted by the
Government in November 2004, aims at ensuring high quality of services rendered to
the citizens and the establishment of a civil service that will significantly facilitate the
exercise of rights of the citizens and the discharge of their obligations provided by
law and at the same time will contribute to the development of economic potentials of
the Republic of Serbia. The Action Plan for the implementation of public
administration reform is a part of the Public Administration Reform Strategy of the
Republic of Serbia. Implementation of the Action Plan, sets out concrete plans and
deadlines for the implementation of the public administration reform between 2004
and 2008, and creation of a new legal framework is of the particular importance. The
Public Administration Reform has to be in line with the general principles of the
European administrative framework, i.e.: rationalisation, modernisation,
decentralisation, accountability and expertise. Under the auspices of the Ministry for
Public Administration and Local Self Government and with donors’ financial support,
several reform-oriented projects were implemented in the previous period. They were
primarily directed towards strengthening technical capacities and human resources of
the Ministry and of several municipalities. Basic and advanced training of employees
were deemed priorities in the first phase of public administration reform. In order to
ensure the continuous implementation of reforms, mechanisms for permanent and
perpetual training of civil servants must be put in place. The most cost effective way
of achieving that goal would be to establish a single training centre that will provide
the highest quality of education. For the purpose of building up a modern, efficient
and cost-effective civil service a pay system reform is underway. Its aim is to
establish a fiscally sustainable pay system which is awarding employees in
accordance to the scope, complexity, responsibility and contribution to the overall
efficiency and performance of all government bodies. Rationalisation implies an
optimal organisation of public administration that provides satisfactory quality of
services with the minimal number of service providers and reduction of the overall
costs of labour. Legal framework will be continually upgraded to create new
institutional framework of providing public services, such as regulatory bodies and
41
public agencies which will assume implementing tasks of the public administration.
These tasks will be gradually and orderly transferred to them. The principle of
modernisation refers to technical-technological modernisation of work of public
administration bodies using state-of-the-art information and communication
technologies. For that purpose, single database will be created and used. A single
communication system will be established between public administration bodies
across the country. E-business and e-signature will become operative. Investing in
modernisation requires substantial financial resources, but, it at large contributes to
the reduction in the labour costs. Introduction of information technologies in the work
of public administration at central and local levels will be carried out through the
establishment of a common information system as defined in the draft National
Strategy for the Development of Information Society. Administrative decentralisation
will develop gradually, in line with the basic principles and models set in Public
Administration Reform Strategy and transfer of fiscal revenues in line with the
existing and future legal framework regulating this subject. Fiscal decentralisation
means that local authorities should pursue the policy of public expenditure and public
revenue that best suits citizens’ needs, while at the same time assuming
responsibility for the quality of services and optimal costs. Fiscal decentralisation will
be based on clear definition of duties and responsibilities between different levels of
government, transparent and stable distribution of fiscal funds, autonomy of the local
government at the revenue and expenditure side and the establishment of relevant
institutions that are administratively and technically equipped for efficient execution of
tasks and responsibilities. Delegation of the tasks and fiscal decentralisation require
sufficient human and financial resources to enable the local self government to be
independent in taking over new competences.
For the purpose of further improvement of administrative procedure of the public
administration bodies and the control of legality and regularity of their work, in 2006
the Ministry of Public Administration and Local Self Government will finish drafting of
the new Law on General Administrative Procedure which, among other things, also
contains provisions on the control of work of public administration and a Draft Law on
Administrative Proceedings providing for the judicial control of the work of public
administration. A specific aspect of external control of the work of public
administration will also be provided by the Law on the Protector of Citizens. This will
ensure that the complete control mechanism of public administration is put in place.
The greatest problem in the forthcoming period will be the implementation of already
enacted regulations and strategies and even the change of the (general) education.
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For the purpose of implementation it will be necessary to expedite specific forms of
trainings, intensify inter-ministerial coordination and that between different levels of
government, improve the work of inspections and ensure political will for the
implementation.
Within the reform of public administration, special attention should be paid to the
development of local government institutions. For that purpose it is necessary to
strengthen the capacities of local self government units in charge of strategic and
operational planning, implementation of decentralised competences, management of
funds etc. Given that joining the EU is one of the strategic goals of the Republic of
Serbia, building and strengthening capacities of all institutions directly involved in this
process is one of the priorities. It is of particular importance to set up and strengthen
European integration units across all institutions, keeping in mind their importance for
efficient use of the EU pre-accession funds. If necessary, the new independent
bodies/agencies will be established to enable proper implementation, monitoring and
reporting on the use of the EU assistance.
European Partnership clearly underlines that the success of the EU accession
process fully depends on the reform of public administration. This document,
therefore, identifies public administration reform as one of six key short-term
priorities. Mid-term priorities defined in this document concerning public
administration sector are the following: strengthening the European integration units
across ministries, full implementation of the Law on Public Administration and the
Law on Civil Servants, strengthening human resources capacities within public
administration, the establishment of a centralised payroll processing system as well
as the adoption and implementation of reforms aimed at decentralisation in order to
strengthen local government capacities.
Poverty Reduction Strategy recommends establishment of a transparent legal and
institutional framework suitable for economic development. This framework implies
institutional capacity building to promote and ensure competitiveness, removal of
administrative barriers to the development of private sector at the Republic and local
level as well as greater participation of local self government bodies in the creation of
environment favourable for local/regional economic growth, paying due attention to
competitive advantages and social and regional limitations and challenges. This
concept includes continuous cooperation between local authorities in developing
strategic frameworks (socio-economic plans/local poverty reduction strategies/local
sustainable development strategies etc.) and support to the structures for the
increase of employment rate and a balanced socio-economic growth.
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By summarizing the above mentioned problems and the actions to be taken in that
regard, the following would be the goals in the field of building and strengthening
institutions and their capacities:
- Continuation of the process of the harmonisation of legislation – namely, to
proceed with all activities already initiated, to improve harmonisation
mechanisms and to draft a National Plan for the adoption of the acquis
communautaire which would set deadlines for the harmonisation of all
remaining processes and sectors;
- public administration reform, by implementing laws and by-laws and all
strategic documents adopted in the previous period;
- strengthening institutional capacities across all ministries, directorates and
specialised organisations that are part of the public administration as well as
across local self government bodies and judicial institutions.
In implementing priorities of building and strengthening institutional capacities, the
international support will be of particular importance. It is expected to be provided in
the form of grants, while the modalities for extending the support may be in the form
of technical assistance, “twinning” projects, study tours, workshops, seminars etc. In
keeping with the stated priority sectors, programmes and measures have been
identified, as is shown in the following table15
Table 10. Priority measures/activities necessary for the implementation of mid-term goals in the
field of building and strengthening institutional capacities Goals Programmes(measures/activities) Legislative reform - completion of a number of reform laws and the harmonisation of
legislation with the EU regulations and with the new Constitution of the Republic of Serbia;
- drafting of a National Plan for adoption of the acquis communautaire; - strengthening capacities for the regulatory impact assessment
Public administration strengthening
- support programmes for the implementation of laws and strategy documents (strengthening institutions, training courses, seminars);
- support to the implementation of the Public Administration Reform Strategy in the Republic of Serbia;
- improvement of the organisational efficiency of the work of public administration and further implementation of information technologies (and, for that purpose, support to the implementation of the development of the Information Society strategy);
- measures for strengthening human resources capacities in public administration (strengthening Human Resources Office and the High
15 Priorities in the field of institutional strengthening within individual sectors are listed in Part 3 of this document, within an overview of priority programmes of activities by sectors while this chapter is treating only general (horizontal) goals/measures whose implementation concerns several departments/institutions as well as the building and strengthening of independent government institutions.
44
Civil Service Council); - building and strengthening the European integration units across all
institutions, strengthening capacities of the EU Integration Office and the establishment of institutional and human capacities for the management of EU funds;
- endorsing European standards for regional politics for the purpose of using structural EU funds (including the introduction of the NUTS territorial classification)
- strengthening institutions for fight against corruption, prevention of money laundering; fight against organised crime;
- improvement of the statistics system of the Republic of Serbia; - upgrading the institutions for the protection of intellectual property
and increasing the level and quality of protection; - higher quality of services rendered by the public administration and
improvement of their work control mechanisms (administrative inspection, inspection in the field of agriculture, trade, tourism, environmental protection, border inspection services etc.);
- support to strengthening the Ombudsman institution; - improvement of the quality infrastructure (completion of legal and
institutional reforms concerning standardisation, accreditation and certification systems for products and services);
- support to the work of the Council and the Commission for the protection of competition;
- establishment of a state audit institution; - strengthening technical and human resources capacities within
institutions for the purpose of implementing the Integrated Border Management Strategy;
Institutional strengthening at the local level
- strengthening local self-government units for the management of resources from European funds;
- improvement of organisational efficiency of local self-government and its technical capacities;
- taking measures for the purpose of strengthening human resources of local self-government, in particular, for the introduction of the function of planning;
- better quality of services and the improvement of work control mechanism;
- creating conditions for efficient decentralisation (sufficient human and financial resources for the assumption of new competences).
Institutional strengthening in the field of judiciary
- support to the Judicial Reform Strategy; - support to independent judiciary (support to the work of the High
Council of Judiciary) - support to the strengthening of transparency of judicial system
(greater participation of public); - more efficient case management (introduction of new systems of
organisation, modernization of certain systems and sub-systems, support to the Centre for Mediation)
- standardisation of the training system and advanced professional training (establishment of a national judicial training institute, strengthening relations with the Schools of Law);
- modernisation of equipment of judicial and penal systems;
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2.3. Building, reconstructing and modernising the infrastructure
In the sense of the identified inter-sectoral priority for international assistance
(including concession loans) – the building, rehabilitation, reconstruction and
modernisation of the infrastructure encompasses the development of the local
infrastructure as well as the transport and energy infrastructure of importance for
regional and international connectivity. The development of the infrastructure
represents an important factor and the impulse for general economic development.
Offering quality and competitive services in terms of price can represent the
generator of the significant growth of the GDP by those sectors, with additional
effects on general economic growth and social development. This chapter is primarily
focused on the present situation and priorities in the field of the physical
infrastructure, while the institutional and legislative reforms and priorities are
analysed within the framework of the third chapter – sector analysis and section 2.2.
Institution and Capacity Building, while the priority projects in the fields of
environmental protection in the sector of transport and energy are considered in the
sections 3.6., 3.11. and 3.13.
Transport. The restructuring of the entire transport sector into a modern, safe and
functional system represents one of the most important pre-conditions for balanced
regional development and economic growth thorough utilization of the comparative
advantages of certain areas in the sectors of tourism and agricultural. An adequate
transport infrastructure is a significant factor in the efficiency of the entire transport
system, but also the crucial pre-condition for achieving sustainable economic and
social development of the Republic of Serbia.
The Republic of Serbia, with its natural-geographical position at the intersection of
the transport corridors VII and X, offers the shortest and most rational transit
connections between the countries of Central and Western Europe and the Far and
Middle East. The adopted final report of the High Level Group16, established under
the auspices of the European Commission, identifies five main multi-modal axes as
the extension of the trans-European transport network (TEH-T) towards neighbouring
countries and regions. The framework of the South-Eastern multi-modal axes
incorporates the project proposals on Corridor X (road and railway), Corridor VII and
16 Report from the High Level Group chaired by Loyola de Palacio, Networks for peace and development – Extension of the major trans-European transport axes to the neighbouring countries and regions, November 2005
46
the multi-modal platform of the Belgrade metropolitan area. Also, on the bases of the
REBIS Study (Regional Balkans Infrastructure Study – 2003), the Western Balkan
countries signed the Memorandum on Understanding on the Development of the
Main Regional Transport Network of South-Eastern Europe in Luxembourg on the
11th of June 2004. The main goal of this MoU is development of infrastructure and
improving regional policy coordination in the field of transport through close
cooperation of Western Balkan countries. The MoU envisages close cooperation of
WB countries in harmonisation of procedures and technical standards and regulatory
and administrative provisions which refer to transport in accordance with European
Union standards and directives. To facilitate the implementation of the Memorandum
on Understanding, the Transport Observatory for South-Eastern Europe (SEETO)
with permanent secretariat in Belgrade was established. In April 2006, the first
multiannual Development Plan of the Main Regional Transport Network of South-
Eastern Europe was adopted which estimates the long-term investment needs for
Western Balkan countries for the period 2006 – 2010.
The overall transport infrastructure in the Republic of Serbia is unsatisfactory. Main
reasons are minimal investment in new objects and poor maintenance during the
1990’s as well as the destructions on main routes during NATO shelling in 1999. The
railway infrastructure is in particularly bad condition. It lags behind the standards of
European countries regarding the electrification of the network, the length of the
double truck railroads, maximal allowed speed etc. and thus requires huge
modernisation17. In addition, the rolling stock is obsolete, insufficient in number and
has a high level of immobility. In the sector of river traffic, the inadequate
maintenance of the internal navigable routes during the 1990’s exerted a crucial
influence on the difficulties in the development of this kind of transport. In the sector
of road transport, the biggest problems refer to poor maintenance and the need for
the reconstruction of the existing and the building of the new road infrastructure and
the low level of traffic safety on the road network. The development of multi-modal
transport in the Republic of Serbia is at the very beginning, considering that there is
not a single fully developed inter-modal transport terminal, and operating with
containers is carried out only on the ŽIT Beograd terminal (the daughter company of
Public Company Železnice Srbije) and in Belgrade’s Port.
17 Only 32.7% of the network was electrified and as a consequence of the bad technical condition of the track a speed limit of 20-40 Km/h was introduced on 162 kilometres of the railway, which is more that 4% of its total length.
47
Starting from the European transport policy for 201018, the Government is planning,
with financial assistance from the EU, to continue the building of the road and railway
infrastructure throughout the Republic of Serbia, as well as to establish the
necessary conditions for uninterrupted navigation through the internal navigation
routes, particularly on the Danube and Sava. In relation to the above mentioned,
several studies, projects and tender documentation necessary for rehabilitation and
upgrading of the transport network in the Republic of Serbia will be developed, such
as clearing and eliminating the bottlenecks on the pan-European Corridor VII as the
most important navigation route, the reconstruction and increase of the capacity of
the railway Corridor X and the increase of the capacity of the road Corridor X.
The network of internal navigation routes in the Republic of Serbia represents one of
the country’s biggest socio-economic potentials, which have not been adequately
used so far. The revival of the river transport stimulates the strengthening of
cooperation in other economic branches (trade, tourism, environmental protection,
etc.) and represents the key element of the socio-economic development not only of
the Republic of Serbia but of all South-Eastern Europe countries. Connecting the
Sava river with the Danube main navigation route and through it with the network of
European navigation routes and the establishment of uninterrupted and safe
navigation on those rivers, would establish better conditions for future regional
cooperation and greater economic development. The establishment of a modern river
information service would intensify the exchange of geographical data and establish
closer cooperation among countries in managing the Danube navigable route.
The construction of the Belgrade – Southern Adriatic motorway and the
reconstruction of the Belgrade – Bar railway are projects of exceptional regional
importance. Through the reorganisation of the railway transport on the basis of the
new Railway Law, the infrastructure would remain under state ownership, while the
organisation and management of the transport would be liberalized and open for
competition. For the route Pancevo – Timisoara a feasibility study is planned to
consider development of a highway.
The strategy for the development of transport in the Republic of Serbia should be
based on the concept of sustainable development (in regard to ecology, technology,
financing and operability) and a multi-modal approach, which means the integrated
planning of the development of the transport system and more efficient use of the
advantages of each transport mode. In the forthcoming period the Government is
18 White Paper - "European transport policy for 2010 : time to decide" (COM 370/2001)
48
planning to intensify the restructuring process of the public companies JAT Airways,
Aerodrom Beograd (Belgrade Airport), PTT Srbija (Serbian Post and
Telecommunications), Železnice Srbije (the Serbian Railway Company) in which the
pre-privatization phase has already been completed. Taking into consideration the
high social and other expenses involved in the restructuring, international assistance
will have a significant effect in this segment.
In addition to the large investments in building the transport infrastructure, it will also
be necessary significantly to improve the management of transport on the existing
network through introduction and development of Intelligent Transportation Systems
(ITS). The introduction and implementation of information-communication technology
in the transport sector would contribute to higher efficiency, the reduction of
environmental pollution and the increase of the transport safety.
Energy. The National Parliament has adopted the Energy Law and the Strategy for
the Development of Energy in Serbia until 2015. The Energy Law created the
institutional framework for the energy sector and established two agencies as
independent bodies in the energy sector: the Energy Agency (the regulatory body in
charge of the improvement and direction of the development of the electricity market,
monitoring the implementation of regulations and rules for the operation of energy
systems, etc.) and the Energy Efficiency Agency (carries out expert jobs on the
improvement of the conditions and measures for the rational use and saving of
energy and power resources, as well as the increase of the efficiency of the use of
energy in all the sectors of consumption). The Energy Agency will create the
regulatory framework for the functioning of the energy systems, adopt tariff systems
for regulated share of the energy market which will include calculation of the service
price based on the justified costs of entities operating in the sector of energy,
regulate natural monopolies-pricing and operations, ensure the transparent and non-
discriminatory approach of the third party to the system, etc. As regards the
restructuring of public companies, the most significant activity in the restructuring of
the public company Elektroprivreda Srbije (JP EPS) is the Government’s decision to
establish two legally independent energy subjects, which commenced work on the 1st
of July 2005: the public company Elektromreža Srbije (JP EMS), whose
responsibilities are energy activities in the transmission of electricity and the
management of the transmission system (the transmission system and market
operator) and the public company Elektroprivreda Srbije (JP EPS) whose
responsibilities are production and distribution of electricity, the management of the
distribution system and electricity trade.
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In the process of stabilisation and accession to the EU, the Government carries out
the intensified regulatory, organisational and technical preparations for joining the
regional and European energy networks. The Republic of Serbia is the signatory of
the Treaty establishing the Energy Community in South-Eastern Europe, and its aim
is establishment of the regional electricity and gas market and implementation of this
Treaty demands close cooperation of a large number of institutions, particularly in the
sector of energy, environmental protection, trade and market development, as well as
significant activities and resources in order to fulfil the undertaken obligations. This is
the first formal agreement which the Republic of Serbia has signed on a multilateral
international-legally binding basis, with the European Union and other countries and
territories in the region (Albania, Bulgaria, Croatia, Macedonia, Bosnia and
Herzegovina, Rumania, Montenegro and the United Nations temporary mission in
Kosovo and Metohija pursuant to the UN Security Council Resolution 1224). The
Treaty came into effect on the 1st of July 2006, having been ratified by the European
Union and six contractual parties. The National Parliament adopted the Law on the
Ratification of the Treaty on the Establishment of the Energy Association on the 14th
of July.
The establishment of the integrated regional electricity and gas market, predicted by
this contract, is based on the following aims: the creation of a stable regulatory and
market framework capable of attracting investments into the gas network, capacities
for the electricity production and a transmission and distribution network, so that all
signatory countries have access to a stable and constant supply of energy, which is
of essential importance for economic development and social stability, the
improvement of ecological situation regarding electricity and gas, energy efficiency
and the promotion of the use of renewable energy sources. The Treaty predicts the
implementation of the acquis communautaire in the fields of energy, environmental
protection, renewable energy sources and competition with defined deadlines for
their implementation. In connection with that, it is needed to provide significant
financial resources for the required investments in the improvement of the existing
capacities and the adaptation of regulations in the field of environmental protection,
as well as in the improvement and building of new interconnecting capacities, which
are the most important pre-condition for the establishment of an integrated energy
market.
Activities on the development of the regulatory and market framework for attracting
investments to the energy sector, with the special goal of stimulating the use of
renewable energy sources and respecting European ecological regulations, are dealt
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in the third chapter – the Mining and Energy Sector. Here we particularly point out the
priority infrastructure projects for the forthcoming period, which are of
regional/international significance:
• The construction of the pan-European oil-pipeline and the pipeline system for
the transportation of oil derivatives
• The construction of the high- pressure gas pipeline in different directions
• The development of the electricity transmission system – the construction,
extension or reconstruction of power stations, as well as the construction of
new long distance power lines.
The National Action Plan for the Gasification of the Republic of Serbia has been
adopted. The plan provides basic technical and economic data regarding the planned
development of the gas system in the Republic of Serbia, as well as the plan of
activities on adopting regulations in the field of gas. This document gives an
estimation of the investment needs for the transport and distribution network
according to municipality.
In addition to the revitalisation and modernisation of the existing transmission
capacities, the development of the power transmission system must follow the
growing need for electricity in the Republic of Serbia. For the period 2002 – 2015, the
expected annual growth rate for the total consumption of electricity is around 1.8%
and of the peak capacity 1%, even though the latest data exceeds those estimations.
This estimation is conditioned on the economic growth in the Republic of Serbia and
is established on the basis of the expected relatively stable annual growth in industry
of around 5% and in the services sector of 6.5%, while because of the improvements
to the tariff system and the correction of prices in the field of energy, as well as
rationalisation because of the implementation of energy efficiency measures, a drop
in the consumption in households is expected, with a return to the current level at the
end of the considered period.
Analysis points out the evident inadequacy of the available production capacities to
cover the consumption of electricity in the Republic of Serbia, thus the absence of the
construction of the new production capacities would condition the import of electricity
and with that the development of the transmission system in the direction of the best
possible connections with the countries from the region. The synchronised work with
UCTE (the Union for the Coordination of the Transmission of Electricity) provides
undeniable benefits connected with the increase of possibilities for the exchange of
electricity and lower risk regarding the procurement of electricity needed to cover part
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of the shortages. The improvement of interconnections with neighbouring systems
operators represents the pre-condition for the establishment, development and
participation in the Regional Electricity Market of South-Eastern Europe which is
established by the Treaty establishing the Energy Community, as well as in the pan-
European electricity market. The central position of the power system of the Republic
of Serbia in the region allows certain benefits to be drawn from the increased transit
through the power system of the Republic of Serbia which, however, also creates
new obligations. In addition, there is the permanent interest for some regional
functions to be located in Belgrade (the function of the coordinator for the security of
the inter-connective power system as well as certain accounting and regulatory
functions on the regional market). Participation in the regional market conditions that
the transmission system operator is organised as a company in accordance with
European directives, guidelines and regulations, which was done in 2005. in
accordance with the Energy Law.
That also means the introduction and preparation of all functions of the technical
system for controlling the power system and objects. So far the functions of
SCADA/AGS19 have been realised. Within the domain of dispatch20 control it is
necessary to complete the development of the control functions in real time (SCADA,
AGS, the evaluator of the condition of the economic dispatch control, systems
analyses) and to connect them in a unique consistent entirety, i.e. realise the control
system with complete functionality, including the completion of the preparation of all
systems of electricity objects for entering the TCS (technical control system). Apart
from that it is also needed to integrate the developed functions of long and short term
planning into a unified system. By connecting planning-analytical functions with
functions of management in real time, it is needed to create a single and consistent
dispatch control system, since that is prescribed by the organisation of the market
depending on the time horizon for carrying out the energy transactions.
The telecommunications system is one of the most attractive fields for joint
investments since most of the required infrastructure already exists. The construction
of a modern telecommunication system facilitates not only the meeting of technical
requirements, but also the provision of services to other beneficiaries and along with
that the realisation of additional income. Within the domain of telecommunications,
the main directions of development are the establishment of the telecommunications
transmission network, the telephone network and the network of mobile radio
19 SCADA/AGC- Supervisory Control and Data Acquisition/ Automated Generation Control 20 Automated control of the power system
52
connections, whereby the basis of the telecommunications system, the
telecommunications transmission network, is realised through the optical
transmission system and partially through directed radio-relaying connections.
The analysis of the development of the power transmission network was carried out
in accordance with certain demands which refer to the increase of consumption in the
power system of the Republic of Serbia, as well as with the conditions for the
connection and the expected transit on the regional energy market. It was also taken
into consideration that the region, in general, is likely to reduce production
capabilities in the forthcoming years (closing down the old blocks in Kozloduj hydro
power station in Bulgaria and unprofitable power stations in Romania, with the
uncertain construction of new capacities). New capacities are expected in the
Autonomous Province of Kosovo and Metohija, but their exploitation is still connected
with a very high political risk (all completed analyses show that the power
transmission system of the Republic of Serbia does not have adequate capacities for
the evacuation of the expected 2100MW from the new power station from the area of
the Autonomous Province of Kosovo and Metohija and the necessary expansion of
transmission capacities can be determined only by a detailed study of the integration
of these new power stations). In accordance with this, it is estimated that the deficit of
electricity in the region is covered mostly by production from the Ukraine.
According to the Programme for implementing the Strategy for the Development of
the Energy Sector, for transmission, the greatest part of investments in the next 10
years will be dedicated to the reconstruction of the existing objects, increasing the
existing objects’ voltage levels and building new capacities including new inter-
connections, but significant investments will also be made in the IT sector and others:
Table 11. Investment and development plan by sectors and priorities (2005 – 2015)21 Summary table: Investment and development plan for the power transmission system (in € millions)
Capital investment field: Priority 0
Priority I
Priority I/II
Priority II
Priority
I. Transmission system 197,00 8,43 82,60 67,77 355,70 II. IT and Telecommunications 11,32 25,57 0,00 0,00 36,89 III. Other 11,04 0,00 0,00 0,00 11,04 Total 219,36 33,91 82,60 67,77 403,64
21 0-II presents the priority marks for investments
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Municipal and local infrastructure. Economic decline, starting from the 1990’s, has
also reflected the situation in the municipal and local infrastructure sector. Insufficient
investment in the development of new, and the maintenance of existing objects and
systems has resulted in numerous objects losing their projected performances,
therefore the quality of the services they are supposed to provide has decreased.
The economic-financial analysis of this sector emphasises three problems in
particular:
• the tariff problem, i.e. the problem of the pricing of municipal services because
households are still subsidised;
• the ownership structure, and particularly the organisation of the municipal
systems is exceptionally economically irrational – there are a large number of
small municipal companies which are unable to operate in an efficient way, which
in turn results in very poor quality of services;
• the financial position of the municipal systems is very unsatisfactory– a large
number operate at a loss, and investment capacity is minimal.
Ensuring that the public municipal companies are market oriented, independent and
efficient is of crucial importance for the improvement of the municipal and local
infrastructure, as well as the provision of quality services.
In the forthcoming period it is necessary to carry out activities to establish legal and
institutional framework needed for the implementation of reforms in the water sector
and the start of the investment cycle. Government’s priority task is adoption of the
Law on Waters and the related by-laws which has to secure its enforcement. This law
is harmonised with European directives and establishes regulatory framework for
public /private partnerships and introduction of economic criteria for management.
There are a total of 55 public municipal companies in the Republic of Serbia whose
basic activity is the production and transmission of heat energy. The total installed
heating energy in boiler units is 6600 MW, which makes heating plants a significant
segment in the country’s energy system. The age of the equipment tells us the most
about the current state of this system: the average age of the boilers is 28 years, the
transmission system 20.6 years and the substations 20.5 years. The revitalisation of
the district heating system is essential due to its age. Implementation of modern
solutions will provide reliable work and positive effects from the standpoints of energy
savings and on the ecological side too. The preconditions for that are quality and well
developed projects and the change of the tariff policy (introduction of measurement)
in order to attract investors and to create the conditions for favourable borrowing.
54
Generally observed, the reforms within the domain of the development of the
infrastructure in the Republic of Serbia are still in the early phase, considering that
the main laws have been adopted, the process of liberalisation started, but the
positive effects and the full effects of new regulations are still to be expected. The
regulatory bodies still do not have the institutional capacity which would enable the
implementation of reforms and regulations in these sector towards utilization the
positive effects of liberalisation to supply and quality of services. The strong
regulatory function in those sectors should lead to: the reform of the tariff policy
aiming at inclusion of all costs and external effects, better commercial effects,
strengthening competition and privatisation as well as further legal changes.
In accordance with this the following priority programmes in the field of the
development of the infrastructure have been identified, in which the future support of
the international community is of great importance:
Table 11. Priority measures/activities for the realisation of the mid-term goals in the sector of infrastructure development
Goals Programs (measures/activities) The modernisation of the transport infrastructure
• the completion of the ring road and Belgrade by pass; • the reconstruction and completion of the road and railway
transport infrastructure on Corridor X with the accompanying branches;
• the construction of the Belgrade-Southern Adriatic motorway;
• the hydro-technical works necessary to improve navigation safety on the Danube (Corridor VII) and development of the river information services;
• the construction and development of the network of modern inter-modal terminals;
• the compilation of strategic studies and the development of ITS (Intelligent Transporting Systems).
The construction and modernisation of the energy infrastructure
• the construction of the pipeline transportation of petrol derivatives;
• the construction of the pan-European oil pipeline; • the construction of the high pressure gas pipeline in
different directions; • the improvement of the electricity transmission system –
the construction, extension or reconstruction of power stations, as well as the construction of new long-distance power lines;
• the modernisation of the technical control system for the electricity system and objects, and a control system for
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transactions on the electricity market
The construction and development of the local infrastructure
• the construction and development of objects in the aim of improving the water supply;
• the realisation of the Strategy for Energy Development in the part which refers to the district heating system (city heating plants) with the introduction of the payment system according to consumption;
• the modernisation and construction of local and regional roads;
• the protection of the source zones in the water supply system;
• the construction of systems for sewage treatment; • the gasification of cities and municipalities; • the establishment and construction of regional waste
areas; the construction and reconstruction of the public lighting objects; maintaining the city sanitation department; the construction and reconstruction of other public objects of interest to the local (self)government units.
Taking into consideration the importance of the local infrastructure for economic
development and improvements to the standard of living, and the local
administrations’ limited possibilities for financing the local municipal companies, the
continuation of the assistance from the international community in financing those
projects is of exceptional importance. At the same time, for bigger investment
projects in the fields of transport and energy, which are important for integration into
regional and international systems, the financing/co-financing from international
financial institution loans is also expected.
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2.4. Environmental protection The significant degradation of the environment occurred in the Republic of Serbia
during the 1990’s. During this period, the absence of new investments and minimal
investment in the sectors of water supply and the treatment of wastewater and solid
waste lead to the significant degeneration of the infrastructure and deterioration of
the provision of basic services as well as the environment and water quality in
general. In addition, excessive industrial pollution appeared in a large number of
identified pollution black spots, with the combined synergetic effect of pollution of
domestic and imported origin, which represents a serious risk to the health of citizens
as well as the surrounding ecosystems of those regions and the trans-border effects
of the transport of polluted materials. In the Republic of Serbia the most endangered
black spots are the cities of Bor, Kragujevac, Pančevo, Novi Sad and Šabac. The
most toxic substances which appear in the aforementioned cities are dichloride,
mercury and other heavy metals, piralen oils, refinery waste and phenols. Emissions
of those pollutants often exceed the permitted limits according to both national and
European Union standards. The situation is additional aggravated by the pollution
caused by the NATO shelling in 1999. Analysis shows that the economic value of the
degradation of the environment in the Republic of Serbia amounts to between 4.7%
and 14% of the GDP (in other countries this value varies between 4% and 8% of the
GDP).
The biggest problems in environmental protection in the Republic of Serbia are
caused by air pollution, water pollution and the loss of water resources, land pollution
and the inappropriate management of waste.
Air pollution in the Republic of Serbia is caused by emissions of waste gasses which
originate from the thermo-energy objects (the use of poor quality lignite and bad dust
elimination) and industrial plants. Steam power plants which use lignite create over
5.5 million tones of flying ash per year, which is not deposited in an adequate way
(covers an area of around 1,800 hectares) which causes uncontrolled secondary
emissions (wind erosions). A particular problem is that the ash waste areas are often
based near the rivers. In those zones so-called “air pollution black spots” have been
identified such as the Kolubara –Obrenovac corridor22, which has an above average
frequency of respiratory diseases and the content of CO2 in the air exceeds the
national and particularly European standards for air quality. The steam power plants
22 300 Kg of sulphuric acid falls on each hectare within a 100 Km radius around TE Nikola Tesla per year. That is fifteen times more than the permitted limit which is considered as the level above which any further acidation leads to the total devastation of the environment with catastrophic consequences.
57
have power units of over 300 MW and the emission of NОx far exceeds the
maximum level of emissions permitted in European legislation. The steam power
plants are a significant pollutant of surface and underground waters and of land, but
also of the water which is used for cooling purposes. The quality of air is especially
aggravated during the no wind whether conditions and the heating season in city
agglomerations (city boiler rooms which failed to carry out fuel substitution),
particularly because of the use of poor quality fuels. Air pollution from sulphur and
lead is particularly problematic because of the poor quality of fuel (petrol with
supplemented lead and high-sulphur diesel). During the previous period the Law on
Air Pollution was completed, and the Treaty on Establishment of the South-Eastern
Europe Energy Community was signed, which prescribes the implementation of
European Union regulations in the field of environmental protection from pollution
caused by the energy sector. Those obligations are defined by Annex II of the Treaty
on Establishment of the South-Eastern Europe Energy Community, and particularly
refer to the implementation of EU directives on big furnaces and the reduction of
sulphur in fuels which are used for steam power plants.
However, there is still no national registry of the emission of greenhouse gasses, the
register of substances which cause damage to the ozone layer or measures for
reducing the emission of gasses into the air. The current legal regulative for
emissions and imissions has not been harmonised with EU regulations, and poor
monitoring does not allow formation of a realistic picture of the level of air pollution in
the Republic of Serbia.
Drinking water, in the Republic of Serbia is generally of unsatisfactory quality. The
main problems are the old distribution network operating at a considerable loss and
the lavish consumption of water. The biggest cities in the country do not have
systems for filtering the communal wastewater, and almost 90% of industrial
wastewater is discharged without prior treatment. Inaccessibility to the clean water
supply and proper sewerage system induce health problems for a part of the
population. This especially applies to population who lives in the slums, often close to
the badly maintained solid waste disposals. The most endangered groups of
population are internally displaced persons, and refugees Romas. Significant water
pollution occurs in the mining basins because of the erosion of mining waste. On
several occasions the significant pollution of ground and underground waters
occurred because of the breaking of flotation dams and it resulted in over 100
millions of tones of flotation waste dispersed in the rivers. In addition, the pollution of
the localities of the Novi Sad refineries caused by the NATO bombing represents a
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high risk for the water supply of the City of Novi Sad because of the vicinity of the
water intake. In the previous period the Law on Financing Water Management was
compiled and the Law on Waters is in preparation. It is necessary to incorporate into
the legislation, adopt and implement the standards from the EU Framework Directive
on Waters. It should be mentioned that at this moment in Serbia, as regards water,
there is a dual legal regulative:
1. The Law on Waters with outdated solutions and
2. The EU Framework Directive on Waters (as the legislation enforced thorough
the Ratified Convention on the Sustainable Use and Protection of the Waters
of the River Danube as well as within the framework of the Sava
Commission).
This duality causes considerable problems and decelerates the process of
harmonisation with the EU in this field. It should also be mentioned that in 2002 the
Government adopted the Water Management Master Plan which is, in terms of its
solutions, superseded both conceptually and methodologically in many areas,
therefore apart from the harmonisation of the legislation it is also needed to initiate
the revision of this document.
Urgent intervention is also needed in the domain of the reduction of pollution from
agriculture, from both big farming and processing capacities. Small farms
cumulatively produce significant pollution from manure and ebb tides water, as well
as in plant production because of the regularly inadequate and irrational use of
chemical substances for protection and fertilisation.
The land in the Republic of Serbia is seriously polluted by the uncontrolled and
inadequate implementation of artificial fertilisers and pesticides, as well as because
of the poor quality of water used for irrigation. The bad management of waste and
chemicals causes serious and long term land pollution. In addition, the problems of
land pollution and eutrofication in the Republic of Serbia, are mostly connected with
the uncontrolled release of untreated waste waters from cattle farms. Public
awareness about the good practices and environmentally friendly management of big
cattle farms practically do not exist. Attempts to present good agriculture practices
are being carried out through the World Bank and UNDP projects regarding the
reduction of the pollution in the Danube riparian area.
In the Republic of Serbia around 60-70% of municipal waste is collected. The
locations of waste disposals do not satisfy sanitary and safety conditions. There is no
reliable information regarding the amount of dangerous industrial waste, and it is
59
estimated that 460,000 tones of dangerous industrial and medical waste is produced
in the Republic of Serbia per year. Furthermore, there are no capacities for the
treatment and disposal of hazardous waste and hazardous waste is temporarily
stored in inappropriate storage rooms. Some of them are several decades old.
Around 6 million tones of flying ash from steam power plants are dumped in
inappropriate locations every year. In addition, the level of industrial waste is
disproportionately high per unit of product, raw materials are irrationally used and
energy efficiency is low. In the previous period the Law on Waste was completed and
the Law on Packaging and Packaging Waste is under preparation. The National
Strategy for Waste Management, adopted in 2003, is being implemented with a
certain dynamic.
In spite of efforts made since the beginning of the reforms, a large number of the
laws from the field of the environment have still not been harmonised with EU
Directives. The new legislative framework for environmental protection was
formulated in 2004 by the adoption of the Law on Environmental Protection (which
predicts the adoption of the Strategy of the Sustainable Use of Natural Resources
and Goods, whose drafting is under way, as well as the National Programme for
Environmental Protection), the Law on the Strategic Impact Assessment on the
Environment, the Law on the Impact Assessment on the Environment, and the Law
on the Integrated Prevention and Control of Pollution. The Government has also
adopted the draft of the National Programme for Environmental Protection for the
period 2006 – 2014 following which detailed action plans will be compiled. The rapid
adoption of laws from this field also continued in 2005 with compiling a large number
of bills from this field. The Government’s strategic goal is inclusion in the international
community’s activities and processes for resolving current and preventing possible
problems in environmental protection. In accordance with that, 64 international
contracts in the area of environmental protection have been ratified to date (the
ratifications were taken over as the Successor State’s obligations) and the ratification
of other international agreements is still underway.
On 12th March 2001 the Republic of Serbia (Serbia and Montenegro) ratified the UN
Frame Convention on Climate Change, one of the most important international
agreements in the field of the environment, in the status of non-Annex 1 state. By
achieving this status and the soon to be expected ratification of the Kyoto Protocol
(the Law on Ratification is in the Parliamentary procedure), the Republic of Serbia
will be in a position to use one of the flexible mechanisms which results from this
Protocol, the so-called Clean Mechanism Development – CDM (while it remains in
60
this status). That means that the Republic of Serbia will be in a position to use
international financing mechanisms to introduce cleaner technologies into steam
power stations, to improve energy efficiency, to stimulate the use of renewable
energy resources and co generative installations, to change fuels, to contribute to
solving the municipal waste problem, to plant new forests and others without using
the domestic, limited financial resources. In that aim the Republic of Serbia will in the
forthcoming period introduce activities for the development of national institutions
which are essential for the implementation of the CDM project (the establishment of
DNA23, etc.) and compile the strategy for the use of CDM. The compiling of this
strategy (especially the part which refers to energy) is the precondition for the
realisation of the CDM project.
In spite of the aforementioned activities in the previous period, there are still
systematic deficiencies in the domain of environmental protection such as: the poor
integration of environmental protection policy with other policies, insufficient
institutional capacities, the inefficient system of financing environmental protection
and the lack of economic incentives for conscious conduct in the field of
environmental protection.
Taking into consideration the fact that energy production is the biggest pollutant, and
that sustainable energy development is one of the most important aspects of
sustainable development as a whole, the Ministry of Mining and Energy, within the
framework of the process of the establishment of the regional energy market in
South-Eastern Europe and its integration into the EU energy market, has initiated the
Convention on the Sustainable Energy Development of the SEE Region, for whose
implementation the donator community’s significant assistance is essential. In
addition, the issue of the increase of energy efficiency and the wider use of
renewable energy sources, as very important aspects of sustainable development,
will also consider significant activities in those fields with additional requests for
assistance from the international community.
In the process of harmonisation and the approach of the Republic of Serbia to the
EU, 30% of all activities refer to activities from the field of environmental protection as
the EU’s third priority.
It is necessary to emphasise that the successful achievement of reforms in the
energy sector is crucial for the success of reforms in the field of environmental
protection in the whole country. The sources predicted for the successful
23 Designated National Authority
61
achievement of the goals of the full implementation of EU standards in the field of
environmental protection in public company Elektroprivreda Srbije thermo sector
alone amount to EUR 1.2 billion, which is around 28% of the total resources
predicted for the implementation of the National Programme for Environmental
Protection.
In accordance with the most important measures for the promotion of the
development and preservation of the environment, the Government’s priority is the
establishment of regulatory economic mechanisms for the realisation of the concept
of sustainable economic development. This should indirectly follow the national
priorities in environmental protection policy, in accordance with the goals and
instruments from the National Programme for Environmental Protection. The Period
2007-2009 should encompass practical, financially acceptable reforms which can be
implemented immediately. That primarily refers to the regulatory reforms, whose aim
is harmonisation with EU acquis for the environment. The goals of these measures
are focused on the improvement of the legal framework, the development of sector
strategies, investment plans and the improvement of the monitoring system, together
with the increase of public awareness. Institutional competences should be clearly
defined in the new legislation in order to resolve the existing overlapping and
inconsistencies. The key institutional priorities are the strengthening of the capacities
of the Ministry of Science and Environmental Protection, the Agency for
Environmental Protection and the Fund for Environmental Protection as well as
strengthening the Ministry of Agriculture, Forestry and Water Management (as the
biggest and direct holder of responsibility for the use of land, water and forest
resources of the Republic of Serbia) and other competent institutions.
In addition to the aforementioned regulatory reforms, it is necessary to work on the
reduction of the pollution of land, surface and underground waters and air from the
sectors of energy production, industry and transport. In accordance with this, the
resources and investments should be directed towards the endangered locations and
priority fields, such as the air pollution from big industrial complexes and steam
power plants, the treatment of wastewater from big industries, the filtering of
municipal waste water in big cities etc. In the privatisation process of companies it is
needed to develop mechanisms for resolving the inherited pollution, i.e. damage
made to the environment. The solutions must be based on the principle “the polluter
pays”. It is also needed to stimulate competition and the inclusion of the private
sector in the fields of the provision of services, especially in the waste and water
management sectors.
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In the aim of overcoming the aforementioned weaknesses in the system of
environmental protection, the following priorities should be realised in the forthcoming
period:
• The expansion and strengthening of institutional capacities in the field of the
environment, including the integration of the policy of environmental
protection into other policies and the harmonisation of national regulations
from the field of environmental protection with EU legislation by 2009 (around
27,000 pages of legislative text);
• The development of an efficient system for financing environmental protection
and economic incentives for economically conscious conduct, as well as the
introduction of special programmes of an agro-environment type into the
support system which the Ministry of Agriculture, Forestry and Water
Management provides to agriculture and farming;
• The improvement of the environmental monitoring system;
• The promotion of the sustainable use of natural resources, the rational use of
energy (firstly through the increase of energy efficiency) and raw materials
and the stimulation of the recycling of waste and the use of renewable energy
resources;
• The reduction of air pollution from the sectors of energy production, industry,
and transport caused by emissions (CO, СО2, NОx, particles, specific
pollutant materials and other GHG gases);
• The reduction of the pollution of land, surface and underground waters with
dangerous materials and waste.
It is estimated that the total investment in environmental protection in the National
Programme for Environmental Protection has increased from the initial figure of EUR
44 million per year to EUR 718 million in 2015 (Table 12).
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Table 12 Total annual investments for the implementation of the Programme (including indirect
expenses) by sub-sectors from 2006 until 2015 (in EUR million)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 TotalWaste 10 36 52 70 138 128 133 139 144 150 1000 Energy 4 2 54 47 51 141 192 243 227 244 1204 Mining 2 0.3 10 12 2 26 Industry 0.3 18 30 20 15 18 21 25 28 31 205 Chemicals 0.5 4 6 6 8 5 5 5 5 5 50 Transport 0.1 1 15 12 12 68 79 94 107 127 515 Agriculture 1 12 14 15 15 11 12 13 15 16 123 Land 0.1 2 2 2 2 3 3 3 3 3 24 Air 0.4 5 7 3 3 19 Water 25 40 50 60 80 108 115 121 127 134 860 Nature 2 2 3 1 4 3 3 3 4 4 29 Noise 0.3 0.5 1.0 0.9 0.9 1 2 3 4 5 19 Radiation 0.4 1 1 1 3 18 18 18 1 1 61 Total 44 125 234 249 343 506 583 667 665 718 4134 Source: the National Programme for the Environmental Protection of the Republic of Serbia
In the period 2007– 2009 the increase in investments is gradual, and the reason for
that is the orientation towards the development of an effective legal and financial
system as well as the system for monitoring and reporting on the system of
environmental protection where activities are not capitally-intensive. The estimation is
that the sector of energy and mining (26%), water (15%) and transport – expenses
directly connected with the improvement of the environment (9%) will share the
greatest part of the total costs for the National Programme for Environmental
Protection (NPEP) The predicted resources represent only the minimal resources
necessary for the priority reduction of the pollution of air and water from the energy
sector, while the total investments for bringing the energy sector to the level in
accordance with BATs, the improvement of energy efficiency, the use of renewable
energy sources, etc. demand much larger funds. The transport costs which are
indirectly connected with the environmental protection system (ring roads, the
improvement of public transport, etc.) account for 22% of the total costs of the NPEP.
It is estimated that the main investment works in the sector of waste management will
be the construction of the sanitary waste areas (an average of EUR 14.5 million
annually). For the improvement of the current waste areas, according to estimations,
more than EUR 2 million is needed per year, and for managing medical waste more
than EUR 1 million per year. The experiences of new EU state members from central
Europe show that their expenses in the field of the environment were around 1.5%-
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2.5% of the GDP in the period before accession to the EU. Bearing that in mind, it is
expected that the participation of expenses for the environment in the Republic of
Serbia’s GDP, considering the average rate of economic growth, will reach the level
of 1.4% of the GDP in the mid-term period. On the other hand, analysis shows that
the economic value of the degradation of the environment in the Republic of Serbia
amounts to between 4.7% and 14% of the GDP. The conclusion which must be
drawn is that the Republic of Serbia faces a big gap between the level of the
degradation of the environment and the possibility of financing the system of
environmental protection, monitored in the short and mid-term.
The Government is aware that the maintainability of the environment plays an
important role in achieving the development goals and provides the funds from the
budget for resolving those environmental issues which are of the greatest priority. At
the same time, the budget resources are not sufficient to finance all the activities and
investment projects in the field of the environment which need to be realized in the
forthcoming years. Therefore, international assistance is of crucial importance,
including loans under the most favourable conditions, directed towards the key
segments of environmental protection. In accordance with that the following priority
measures and activities have been identified in which international assistance could
contribute to the achievement of the aforementioned goals in the domain of
environmental protection.
Table 13 Priority measures/activities for the realisation of the mid-term goals in the field of environmental protection
Goals Programs (measures/activities)
Strengthening institutional capacities in the field of environmental protection
• the compilation and adoption of action plans for the realisation of the National Programme for Environmental Protection (2006 – 2014),
• the integration of policies and regulations on environmental protection into other sector policies and laws in accordance with EU acquis
• the establishment and strengthening of the capacities of the units for planning and managing projects in the field of the environment,
• strengthening the administrative capacities for the implementation of regulations on the estimation of influences on the environment,
• strengthening the administrative capacities in the field of industrial pollution,
• strengthening the capacities of the Environmental Protection Agency and the Environmental Protection Fund
Development of an efficient system for financing environmental protection
• development of an efficient system for financing environment protection based on restricted funds and the wide implementation of economic instruments,
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• implementation of the Provision on Compensation for air emissions and the generation of waste,
• the introduction of the agro-environment scheme into the Ministry of Agriculture, Forestry and Water Management incentive scheme.
Reduction of industrial pollution
• reduction of emissions into the air of СО2, NОX, VOC, PAX suspended particles and other pollutants from existing industrial installations which do not meet EU standards,
• filtering of industrial wastewater through the revitalisation of existing devices and the construction of new installations for filtering wastewater from those industries which discharge hazardous substances
• implementation of the integrated licence system for industrial installations in accordance with the Law on the Integrated Prevention and Control of Environmental Pollution,
• remediation of contaminated land in industrial complexes, • introduction of cleaner production and the Environmental
Management System in industrial installations, • increase of energy and raw material efficiency in industry
and the reduction of waste.
Reduction of pollution from the mining sector
• the filtering of wastewater resulting from the exploitation process and the refining of mineral raw materials through the revitalisation of the existing filtering installations and the construction of new installations on locations where hazardous substances are discharged.
• testing possibilities for the use and exploitation of mineral raw materials created by mining and processing of mineral raw materials,
• the remediation and re-cultivation of areas degraded by mining,
• the reduction of the risks of water pollution from mining activities,
• solving the problem of the disposal of mining waste and drilling sludge from oil wells,
• revision of regulations in the field of mining and geological research.
Reduction of pollution from the energy sector
• reduction of the emission of СО2, NОx and suspended particles from large combustion installations in accordance with EU directives on large furnaces (2001/80/ЕС),
• reduction of the negative influence of oil refineries on the environment,
• filtering of wastewater from the energy sector through the revitalisation of existing filtering capacities and the construction of new installations in the locations where hazardous substances are discharged,
• reduction of the influence on the environment during the dispersal of flying ash through changes to the discharging technology,
• increase of energy efficiency in the energy sector (in the sectors of energy production and energy consumption) and the reduction of the creation of waste
• re-cultivation of existing ash dumps by 2011, • introduction of cleaner production and the Environmental
Managing System into industrial installations,
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• increase of the scope of the use of renewable energy and gas sources through the implementation of EU directives and the strengthening of capacities,
• connection of individual households in cities with over 20,000 inhabitants to the district heating system or the gas heating system,
• increase of energy efficiency and the reduction of heat loss in heating plants and the distribution network,
• exploitation of 20% of flying ash from steam power plants by 2011.
Improvement of the environment in the sectors of agriculture, forestry and hunting
• development of farmers’ awareness in the field of the environment through the development and promotion of the code of good agricultural practice,
• permanent improvement of legislation in the field of agriculture, forestry and rural development in the sense of adapting it to the best legislative practice in the EU,
• adoption of strategic planning documents in the field of forestry and hunting,
• reduction of discharging nutrients and other hazardous substances from diffusive sources and identifying sensitive areas at risk from water pollution by nitrates by 2010 in accordance with directive 91/676/ЕЕС,
• introduction of the system of controlled production and use of fertilisers and pesticides on agricultural land because of the reduced effect on the environment,
• improvement of environment protection management on cattle farms and processing installations, the introduction of good agricultural practices and rational management and the use of organic waste in cattle breeding and agriculture,
• development of organic agriculture, • improvement of the system of sustainable management,
especially in private forests, • development of modern monitoring in forestry and hunting, • improvement of management in the fields of hunting and
fishing and the reduction of their negative influence on biodiversity and protected natural areas.
Reduction of pollution from the transport sector
• gradual removal of leaded petrol by 2010, • improvement of petrol quality according to directive
2003/17/ЕС by 2010, • harmonisation of all vehicles produced in the Republic of
Serbia and imported by 2010 with the vehicle emission limits according to directives 98/69/ЕС and 2001/100/ЕС,
• improvement of the conditions and competitiveness of public transport in big cities, so as to reduce emissions from vehicles in city centres,
• implementation of bio-diesel in accordance with directive 2003/30/ ЕС on the promotion of the use of bio fuels,
• construction of ring roads in cities where traffic exerts a serious effect on the environment,
• reduction of pollution from boats on navigable waters, Improvement of the quality of water and water resources
• harmonisation of national regulations with EU legislation, • improvement of inter-institutional coordination in the field of
water, • improvement of the protection of all underground water
deposits, etc., • improvement of water quality in water circulation through
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the reduction of the discharge of non-filtered municipal and industrial wastewater,
• innovation of standards and improved laboratories for the control of water quality,
• establishment of the sustainable use of underground water deposits,
• revitalisation and functionality of existing devices for the filtering of municipal wastewater,
• filtering of wastewater in communities with an organised water supply and which have a significant influence on the direct recipient and on the water quality in sensitive zones,
• ensuring that the quality of drinking water in municipalities meets the standards according to the directive on drinking water 98/83/ЕС and extending the centralised water supply system to selected village areas with unsatisfactory water quality,
• rationalisation of the use of water by individual consumers; • increase of the coverage level of the public sewage systems
to 65% of the population by 2015.
Improvement of waste management
• harmonisation of national regulations with the EU legislature,
• development of regional plans for water management • construction of regional sanitary waste dumps, • introduction of the separate collection and treatment of
hazardous substances from households and industry; • development of programmes for managing animal waste, • establishment of capacities for the treatment of hazardous
waste, • construction of capacities for burning organic industrial and
medical waste, • completion of the construction of the factory for the
processing and safe depositing of hazardous waste, • programmes for using waste as an alternative fuel in
cement factories and forges, • rehabilitation of the existing dumps which represent the
greatest risks to the environment, • increase of the rates for the reuse or recycling of waste from
packaging to 25% of the quantity, • intensified introduction of good agricultural practices into the
management of nutritious materials on farms.
Improvement of the management of chemicals and protection from accidents
• harmonisation of national regulations in the fields of the management of chemicals and protection from accidents with EU legislation,
• revision of national regulations on accidents in industry and transport,
• ratification of important international conventions from this field,
• development of an IT system for managing chemicals and protection from accidents,
• strengthening of administrative capacities for managing chemicals,
• establishment and development of system for risk management and response to chemical accidents in industry and transport.
Improvement of air quality • harmonisation of national regulations from the field of air
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and climate changes
protection with EU legislation, • establishment of a register for recording pollutants and the
balance of emissions, • modernisation of the monitoring and laboratories network
and the establishment of automatic stations for the continuous monitoring of the air quality,
• development of the capacities for the implementation of the Kyoto Protocol,
• compilation of a national program to deal with climate changes by 2007,
• compilation of a strategy for the implementation of clean development mechanisms,
• improvement of the air quality in line with standards, the reduction of emissions from the energy, transport, industry and other sectors
• establishment of the automatic monitoring of significant emitters.
Nature, biodiversity and forestry protection
• harmonisation of national regulations from the fields of the protection of nature, biodiversity and forests with EU legislation and international conventions,
• development of a national strategy for the sustainable use of natural resources,
• development of a national strategy for the protection of biodiversity, geo-diversity and agro-diversity,
• establishment of the control of biodiversity components, • prevention of the loss of biodiversity in accordance with the
Kiev Declaration by 2010, • strengthening of administrative capacities in the field of the
protection of nature, • introduction of effective measures for the control of the
adoption of the GMO • compilation of a biodiversity inventory, keeping records of
endangered ecosystems and the habitats of rare and endemic species by 2007,
• increase of areas under forestation and the improvement of the structure of forests,
• improvement of the system of managing protected natural resources of national and international importance.
Protection of land
• harmonisation of national regulations from the field of land protection with EU legislation,
• reduction of land at risk from erosion by carrying out anti-erosive measures and introducing effective measures for the control of erosion,
Protection from noise
• harmonisation of national regulations in the field of the protection from noise with EU legislation,
• establishment of zones and a system of noise control in communities with the highest noise emission,
• establishment of targeted noise control at the busiest transport arteries,
• reduction of noise emission in the most endangered locations.
Protection from ionising and non-ionising radiation
• harmonisation of national regulations from the field of the protection from ionising and non-ionising radiation with EU legislation,
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• improvement of institutional capacities for the implementation of regulations in the fields of ionising and non-ionising radiation,
• development of a program for managing radio active waste, • full decontamination of land contaminated by depleted
uranium, • modernisation and extension of the radioactivity monitoring
system by 2012, • provision of capacities for the permanent dumping of
radioactive waste.
2.5. Rural development
The development of rural areas was made a priority field in economic and social
development because almost half of the citizens (42%) of the Republic of Serbia live
in those areas which encircle almost three quarters of the country (according to the
OECD criteria, rural areas are those with a population density of less than 150
citizens per square kilometre).
For decades the rural areas have been in a state of economic and cultural
stagnation, which drastically increases poverty levels. The poverty rate in rural areas
in the Republic of Serbia is 14.2% which means that every seventh citizen is on the
poverty line. The poverty level in rural areas is almost twice as big as that in cities
(7.8%). The rural poverty rate is highest in South-Eastern Serbia where it amounts to
22.7%. The rural population, in comparison with the urban one, also faces a greater
depth and sharpness of poverty.24 The main causes of the higher poverty level in
rural areas are the aging of the population and resulting decreased working capability
and earnings capacity, followed by the less favourable educational structure of the
citizens as well as the negative ownership structure from which the long term bad
position of agricultural production and the difficulties involved in its revitalisation in a
relatively short time originate.
The several decades cumulated regional economic de-balances represents an
additional economic development problem. The Republic of Serbia is currently
characterised by exceptionally large regional disproportions, with the ratio between
the most and the least developed municipality standing at 1:26 in 2004, measured
24 The depth (gap) of poverty shows the amount of resources (as the level of the poverty line) required for the population to rise above the determined poverty line (under ideal conditions the perfect targeting of currency transfers). The level of poverty is the index which shows to what extent certain categories of the poor fall under the poverty line.
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according to the national income per capita.25 This ratio is the least satisfactory in
Europe, which expressively illustrates the level of backwardness and
underdevelopment of a large number of regions and municipalities in the Republic of
Serbia. The differences in development level among the regions have additionally
increased during the period of transition, bearing in mind that since 2000 the
disproportion between the regions has increased with the trend to continue. The
particularly endangered regions are traditionally underdeveloped municipalities and
regions, which have been marked by the collapse of the big economic systems, such
as in Southern Serbia26 and the Stara Raska region27. In addition, a very difficult
economic and social situation exists in the municipalities in Eastern Serbia, primarily
in Bor and Majdanpek, which were the regional mining centres, and which today
have the status of devastated areas.
In the previous period the regional development of the Republic of Serbia was based
on the sector, and not integral concept, which resulted in overlapping, poor
coordination and focusing only on certain segments of development, which prevented
the achievement of synergy effects. The absence of the law which would regulate the
issues related to the regional development of the Republic of Serbia also presents a
serious obstacle. The Law from 1995 which regulated the problematic of
underdeveloped areas is no longer applicable.
The undefined institutional framework lead to the insufficient connection between
municipalities and districts in defining developmental initiatives, the flow of
information and the harmonization of national, regional and local development goals
and priorities. Insufficient and slow decentralization in the Republic of Serbia also
presents an additional defect.
Such an approach to decentralization influenced regional development in the
Republic of Serbia of today and resulted that underdeveloped areas are mostly of
agrarian – rural type with the following dominant characteristics:
• an inadequate economic structure with the dominant participation of agriculture,
25 According to the Law on the Insufficiently Developed Regions of the Republic of Serbia, 37 municipalities were defined as underdeveloped regions in the Republic of Serbia, out of which 12 municipalities are the most underdeveloped. Underdeveloped municipalities are considered to be those which development level, according to national income per capita, the employment level, circulation in retail trade per capita and the number of telephone lines per 100 citizens does not exceed 50% of the average in the Republic. 26 The area of Southern Serbia consists of the municipalities of the Jablanički district (Bojnik, Vlasotince, Lebane, Leskovac, Medvedja and Crna Trava) and the Pčinjski district (Bosiljgrad, Bujanovac, Vladičin Han, Vranje, Preševo, Surdulica and Trgovište). 27 The area of Stara Raška consists of the municipalities of Priboj, Prijepolje, Tutin, Cjenica, Nova Varoš and Novi Pazar.
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• a shortage of qualified labour force – the majority of those areas are facing the
problem of depopulation and shortages of quality human resources with the
specific and qualitative knowledge,
• underdeveloped infrastructure capacities – the weak social and economic
infrastructure, mostly inefficient, expensive and insufficiently equipped,
represents an additional limitation to the economic growth and social
development of those areas,
• poorly developed enterprise sector and
• remarkable problems in environmental protection.
In the forthcoming years in order to change this situation and to achieve more
balanced regional development, the Government must implement concrete state aid
programmes and systematic measures to promote and support the economic revival
of the underdeveloped and devastated areas. Because of that, rural development
stands out as an area with significant investment needs, i.e. the improvement of
living and working conditions in villages and the promotion of rural areas as healthy
and attractive areas for living. The realisation of this aim is primarily determined by:
• the prevention of the depopulation process;
• the implementation of the process of decentralisation of the state administration
and particularly fiscal decentralisation;
• the economic regionalisation of areas;
• the harmonisation of economic, social and spatial dimensions of development;
• the coordinated distribution (territorial dispersion) of funds and other types of
assistance in those sectors which are defined as areas with special
developmental problems;
• the prevention of the emergence of new areas with big developmental problems;
• the protection of minimal functional communities in the areas in order to assist the
protection of cultural heritage; and
• relative improvement of the regional position measured according to the rate of
the GDP to the purchasing power of the population in comparison with the
bordering regions in the neighbouring countries.
The initiatives which, in addition to agriculture, incorporate numerous other sectors
will be directed towards the reduction of rural poverty. The aim is to support
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employment and economic growth and the improvement of the standard of living in
rural areas, particularly in the deserted, bordering and mountain areas. Special
attention will be paid to the older population of farmers and other vulnerable
categories of citizens.
All of the aforementioned points, need a focused action which would lead to the
development of the underdeveloped areas and the increase of social prosperity, with
the stress on using the comparative advantages of individual territories. Consolidated
regional development is one of the priorities which will be introduced in the
forthcoming period, and will include investment into both urban and rural areas of the
country. In accordance with this, it is needed to implement the following activities:
• the development of the legislative and institutional framework at national, regional
and local level as well as the development of the financial mechanisms for rural
development;
• the acceleration of the decentralisation process;
• the acceptance of European standards for regional policy aiming at the use of
EU structural funds in the future;
• the establishment of the statistic-analytical base for the assessment of regional
competitiveness, as well as for monitoring and estimating the effects of regional
policy in accordance with EU statistical standards (NUTS);
• the allocation of part of the donated resources for increasing the development of
the capacities of poor areas through the provisions of various kinds of technical
assistance and micro loans;
• the strengthening of interregional and inter-municipal cooperation, especially on
activating the local development plans and the stimulation of employment;
• the construction of the municipal infrastructure and general infrastructure of
importance for the development of small and medium sized enterprises;
• increase of the accessibility of citizens to educational, health and social services
and cultural institutions.
Rural and regional development demands political dedication and a coordinated
approach which should encompass all levels of government. In the EU countries the
interest and responsibility for rural development policies extends through numerous
ministries, agencies and non-governmental organisations. That is understandable
because rural development is a complex socio-economic development of a special
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type of region, and includes a whole series of issues such as unemployment,
industry, agriculture, health care, transport, environment, social services, education,
communication, finances, cultural inheritance and similar, and as such has an
interdisciplinary character, and thus is the subject of the work of several ministries
and other competent governmental bodies. Regional development in the Republic
of Serbia should be based on the EU’s best practices and represent the preparation
for the future use of EU structural and regional financial resources. It is very
important to strengthen the institutional capacities of ministries and other competent
institutions for the future use of international aid resources, particularly EU pre-
accession funds dedicated to agricultural and rural development. Great responsibility
also lies with the local communities in the mobilisation of local resources and the
establishment of the ambient for overcoming the underdevelopment and poverty.
For financing the projects for the improvement of rural development in the next three
years and bearing in mind the value of the required investments and the limited
possibilities of the aforementioned activities being carried out by local self-
government through loans or financing from the municipalities’ own funds or those of
the Republic of Serbia, it is essential to ensure the international community’s
significant grant assistance to the least developed areas. In that aim the following
priority areas for international assistance have been identified:
• improvement of economic activities and competitiveness (the development of
village tourism, services, entrepreneurship, cultural manifestations etc.);
• improvement of agricultural production (the construction of irrigation and draining
systems for agricultural land, organic production, agro business
centres/incubators etc.);
• improvement of the standard and quality of life in rural areas (access to health
and educational institutions, village waste deposits etc.).
In the previous period numerous activities have been financed from the budget
resources for the development of villages, particularly for the improvement of
agricultural production and investments, the village infrastructure, organic production
and the promotion of villages. In the forthcoming period assistance from the
international community for the Government’s efforts to improve and develop rural
areas is needed. It is estimated that from the total international assistance in the next
three years at least 10% will have to be invested in rural development.
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The following table shows the aims and programmes/measures for their achievement
in the following three-year period in the field of rural development. 28
Table 14 Priority measures/activities for the implementation of the mid-term aims in the field of rural development
Goals Programs (Measures/activities)
Development of the legislative and institutional framework at national and local level
• further strengthening of administrative capacities for the formulation and implementation of policy,
• phase II of the development of the capacities of the Agency for Agricultural and Rural Payments,
• adoption of the main principles of rural development policy, • adoption of regional and local action plans for rural
development, • categorisation of less favourable areas for production in
accordance with the EU model, • preparation of the Program for the Development of
Ecological Agricultural Systems, particularly for marginal and protected nature areas,
Acceleration of the decentralisation process
• implementation of fiscal decentralisation with the aim of providing special tax incentives for investments in underdeveloped areas,
• permitting the local self-government to owe and manage the public property on its territory,
• implementation of the decentralised services and providing assistance for pilot projects in this field,
• development of the capacities of local self-government to take over the new authorities and responsibilities resulting from the decentralisation
• Development of financial mechanisms to support rural development
• preparation of rural development programmes for the implementation of the agrarian budget resources and donations,
• allocation of a part of grants to increase development capacities of poor areas through provision of various forms of technical assistance and issuing of micro-loans through banks and non-profitable institutions.
• creation of sufficient supply of short, mid and long term loans necessary to meet the demand arising from the farmers in the undeveloped areas
28 The development, reconstruction and modernization of the local infrastructure as the priority aim in the field of rural development was worked out within the framework of inter-sector priority “Infrastructure development and modernization”.
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Improvement of economic activities and competitiveness
• extension of the network of regional agencies for the development of small and medium sized companies and enterprisers;
• development of village tourism and services, • the opening of incubator centres (5) and transition centres
(13), • development of programmes for stimulating female
entrepreneurship • strengthening of inter-regional and inter-municipal
cooperation.
Improvement of agricultural production
• assistance for the modernisation of objects and machinery on the farms,
• training in the field of new agricultural techniques and skills, • assistance in the construction of new objects for food
processing. • development of irrigation and draining systems on
agricultural land, • assistance for young farmers to build up their farms, • development of organic production.
Improvement of the standard and quality of living in rural areas
• renovation of villages and rural objects, • efficient implementation of current and defining of new
programmes, measures and activities directed at the most poor and socially vulnerable categories of the population,
• projects of the modernisation and upgrading of the health care system,
• development of educational, social, cultural and sports institutions and objects,
• development of the programme for protection of the environment and rural areas,
• construction of rural waste areas.
Diversification of the rural economy29
• working engagement of the agricultural population in non-agricultural activities,
• stimulation of ecological services, • providing assistance to those areas which are not eligible
for agricultural production through promotion of food quality, higher standards and animal welfare.
29 In accordance with the Strategy for Agriculture in Serbia
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3. OVERVIEW OF THE SITUATION BY SECTOR - SECTORAL PRIORITiES AND NEEDS IN THE PERIOD 2007 - 2009
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3.1. Finances In the period 2000.- 2005, the Ministry of Finance implemented significant reforms in
fiscal and monetary system. Monetary policy was primarily oriented towards curbing
the inflation incurred after the prices were liberalized. With the price liberalization,
foreign currency exchange rate was set at market value, floating exchange rate was
introduced, followed by the current transactions convertibility of the dinar, and the
new Law on Foreign Exchange Operations also liberalized to some extent capital
transactions. In the domain of the fiscal system, the budget planning and execution
system was reformed, the Treasury was established at the level of the RS and local
levels, tax system was reformed (it became more transparent and efficient), the
public revenues collection and inspection procedure were improved, reform of
pension and health insurance was initiated. Regardless of the reforms initiated,
public consumption is still high, and government interventions in business and in
social funds are still strong and direct. Accordingly, fiscal sustainability is still a great
challenge. The Ministry of Finance has modernized the customs operations, by
introducing electronic database which made it possible for the traders to obtain
declarations in electronic format and thus reduced the time required for import and
export.
Below is the list of most significant reform projects that were implemented with
donors’ financial support. The largest number of these projects has been oriented
towards the strengthening of technical and human capacity of specific directorates
and institutions within the Ministry of Finance.
Most important projects in the financial sector in the period 2001- 2005: 1. Macroeconomic reform, strengthening of the
Central Bank, privatisation of banks, and supervision of banks
490,000 USD USA 2001
2. Project of the improvement of debt management related services 1,900,000 USD Switzerland 2001
3. Financial sector development 6,000,000 USD World Bank 2001
4. Public Procurement Office 30,000 GBP United Kingdom 2002
5. Micro-finance diagnostic study 19,000 GBP United Kingdom 2002
6. Support to the Anti-Corruption Unit within the Ministry of Finance 126,000 GBP United Kingdom 2002
7. Support to institutional building (Customs Administration) and feasibility study for border crossings
700,000 EUR European Commission 2002
8. Tax policy reform and administrative reform 8,660,000 USD USA 2002- 2005
9. (ATTF) – training for financial sector 77,400 EUR Luxemburg 2003
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10. Management of public finances 16,000,000 EUREuropean
Commission (CARDS)
2003
11. Belgrade Stock Exchange – remote trading project 425,000 EUR Luxemburg 2003
12. Z84 INFORMEST trainings for experts 59,000 EUR Italy 2003
13. Support to the Ministry of Finance, Division of Macro-Economic and Fiscal Analyses 730,000 GBP United Kingdom 2003
14. Support to the funds management unit within the National Bank of Serbia 250,000 EUR Spain 2004
15. Support to customs and tax administration 6,000,000 EUREuropean
Commission (CARDS)
2004
16. Methodology for the valuation of City of Belgrade real estate 338,500 EUR France 2005
17. Technical assistance to the Agency for Deposit Insurance, Rehabilitation, Bankruptcy and Liquidation of the Banks
14,105,000 SEK Sweden 2005
18. Support to customs and tax administration 3,000,000 EUREuropean
Commission (CARDS)
2005
19. Reform of public finances 2,000,000 EUREuropean
Commission (CARDS)
2005
20. Introduction of the Republic of Serbia programmatic budget 250,000 EUR Norway 2005
21. Financial training in the Treasury Administration and Public Revenue Administration
187,145 EUR Norway 2005
22. Belgrade Stock Exchange – redesigning of IT system 405,000 EUR Luxemburg 2005
23. Centralised payment system in public sector 2005
24. Training within the Treasury and Public Payments Administration 187,000 EUR Kingdom of
Norway 2005
In the next three-year period, the implementation of strict and sound economic policy
and reforms which guarantee macroeconomic stability, sustainability of public
finances, security of operations, strengthening of competitiveness of the economy,
and support to long-term sustainable economic development will be continued.
Particular emphasis will be placed on the coordination between the monetary policy,
fiscal policy, and salary policy. The long-term economic development strategy of
Serbia will comprise sustainable economic development, increasing competitiveness
of the economy, building of knowledge based society, balanced regional
development, and EU integrations.
Tax policy will, in the coming period, have as permanent task improvement, and tax
burden reduction. Lowering the overall tax burden, will be aimed at the reduction of
direct tax collection, but at the same time new instruments will be directed to increase
indirect tax collection. As the result of these measures the tax burden of economy
79
should be relaxed while the taxation of consumption will increase. To this effect, it is
necessary to develop a study on the possibilities of decreasing the tax burden on
economic activities, with detailed overview of all the costs incurred by economic
entities on the basis of taxes, fees, charges and other duties. In the next mid-term
period, a smaller reduction of public expenditures will be achieved, compared to
2005, but the emphasis will be on changing the expenditure structure with the aim of
supporting rapid development of economic activities. Radical change in the structure
of public expenditures will take place in the course of the reform process, through the
reduction of individual types of costs and expenditures. Public expenditure policy will
be, to a great extent, supported at the time of introducing the program concept in the
budget preparation at all levels of government and first and foremost the budget of
the central government, namely the Republic. For the achievement of fiscal
sustainability it will be useful to ensure increased domestic savings and greater inflow
of FDIs, as the tools for attainment of high and sustainable growth.
Public debt policy will be, in the coming mid-term period, oriented towards further
reduction of the share of public debt in GDP and ensuring the environment suitable
for unhindered servicing of the country’s liabilities towards domestic and foreign
creditors, as well as the control of new borrowings, in accordance with the Law on
Public Debt. Moreover, it is expected that negotiations with the Paris Club of
creditors will be continued, as well as with the creditors with whom no debt
rescheduling has been agreed. Also expected is the regulation of the status of
debtors from the territory of the Autonomous Province of Kosovo and Metohija. Main
function of the public debt management strategy is to change the structure of debt
and to ensure regular servicing of matured liabilities, along with careful selection of
the loans for which guarantees will be issued, early repayment of the most expensive
loans, continuous monitoring of the fluctuations of foreign currency exchange rate
and interest rates on international markets, so that exchange rate and currency risks
could be contained.
Long-term increase of imports will directly affect the sustainability of foreign debt
servicing. Main directions of the state aid control policy in the coming period will be
determined in accordance with relevant EU acquis, namely the obligations indicated
in the Stabilisation and Association Agreement (SAA) and timelines for their
performance. In accordance with the EU criteria, the Republic of Serbia complies
with the requirements for the status of "A" region (GDP is lower than 75% of the GDP
at the EU level) and, based on the thus far led SAA negotiations (February 2006), the
Republic of Serbia would retain this status in the period of 5 years after the coming
80
into force of the SAA. This is an exceptional convenience; since it implies the
application of maximum allowed limits in state aid granting, primarily regional aid, in
accordance with the European Commission’s Regional Aid Guidelines and Multi-
Sector Regional Grant Framework for Major Investment Projects. This status has
significant implications in respect of free actions of the government and granting of
other forms of state aid. Implementation of the state aid control policy will, as the
ultimate effect, positively influence the development of economic policy, encourage
foreign investments, recovery and restructuring of companies, privatisation process,
SMEs development policy, protection of competition, rational management and
planning of the state budget, more efficient cooperation with international
organizations. The Treasury Directorate, as the administrative body within the
Ministry of Finance is, by virtue of the Amending Law on the Budget System, the
main implementing party for the activities of state aid registration and monitoring. In
performance of these duties, the Treasury Administration will prepare annual reports
on the state aid granted in the Republic of Serbia (the first of such reports, with the
data for years 2003 and 2004 was adopted by the Government on the 4th of May
2006; the second report, with the data on the state aid granted in 2005, has been
prepared and has been submitted for review, as laid down in the Government’s Rules
of Procedure). Moreover, the Treasury Administration takes an active part in the
preparation of the Draft Law on State Aid Control and pertaining by-laws, upon
whose adoption, for the first time in the Republic of Serbia, a system of state aid
control will be put in place, in compliance with the relevant EU acquis.
The goal in the implementation of fiscal policy is to minimize any deviations from the
projected policy, namely to have the fiscal risks reviewed and their effects prevented.
To realize the projected volume of fiscal sector revenue and expenses, it is
necessary to have the fiscal risks reduced to the least possible level. These risks are
present both on the revenue and expenditure side, and they are conditional upon the
macro-economic, political and social developments in the country and beyond.
Identification of potential risks, namely monitoring of risks and analysis of fiscal
fluctuations, in particular assessment of possible deviations and negative effects, are
the precondition for efficient management of public expenditures, namely the overall
system of public finances.
Towards the end of 2005, within the pension system reforms, the Law on Voluntary
Pension Funds and Pension Schemes which is in full compliance with EU Directives
was adopted. This Law placed the supervision over the operations of the pension
fund management companies and enactment of relevant by-laws into the hands of
81
NBS. This segment of financial sector should contribute to the deepening of the
presently shallow Serbian financial market; namely, these funds would dispose of
long-term financial resources which they would be able to invest into the securities
issued by good-standing companies and this could cause a greater number of
companies to begin selling their shares and securities on the market and in this way
provide long-term and less expensive funding for their operations. Also, the
development of this sector could result in the increase of competition on the financial
market.
Implementation of the Poverty Reduction Strategy is also subject to macro-economic
stability and fiscal sustainability. Main assumptions of the Strategy, on which
depends the reduction of poverty, include: maintenance of mid-term macro-economic
stability as the support to sustainable economic development (of minimum 4-5%
p.a.), continued fiscal reforms and ensuring the fiscal sustainability of public
expenditures. Priorities in the coming period, from the PRSP perspective include:
sustainable and high GDP growth, reduction of inflation, increase of exports, greater
share of private investments in the GDP, encouragement of long-term retail savings
by increasing the credibility of banking sector, decreasing the share of public
expenditure in the GDP.
In summing up, it can be said that, in the coming mid-term period the Ministry of
Finance will pursue the following goals:
• maintenance of macro-economic stability (at this moment, the NBS is switching to
the target inflation concept in its monetary policy, which should contribute to the
maintenance of macro-economic stability);
• strict salary policy in the public sector;
• reform of the pension system (in cooperation with the Ministry of Labour,
Employment and Social Policy);
• continued legalisation of grey economy and extension of the tax base, along with
the relieving of burden, by lowering the tax rates, especially payroll rates;
• improvement of the budget preparation and implementation process;
• continued adjustment of foreign-trade regime to the EU trade measures and WTO
rules.
82
• speeding up the pace of the restructuring and privatisation process in large state-
owned and socially-owned enterprises, and providing sufficient funds from the
budget for increased unemployment
• completing the banking system reform
• reform of the system of administrative prices and correcting the prices of energy
• implementing land reforms, cadastre legislation
• reform of the labour market
• continuing adjustment of the foreign-trade system to the autonomous EU trade
measures
• upgrading of the business environment through implementation of systemic laws
• modernization of the education system and research and innovation policy
To achieve the goals above, it will be necessary to continue technical and
institutional capacity building and modernisation of specific organisational parts of the
Ministry (first of all Tax Administration and Customs Administration), with the purpose
of combating corruption, cross-border crime, and tax evasion. Moreover, it will be
necessary to continually invest in human resources and, primarily, in the
strengthening of the employee skills of analyses, planning, monitoring, and
evaluation of the budget funds allocation, and to increase the educational level of
accountants, financial officers, and customs operational services. The table below
shows a proposal of the projects, for the following three-year period, which could be
financed, primarily, through grants, but also from domestic sources, and whose
completion would contribute to the fulfilment of the above requirements.
Table 15. Priority projects in financial sector, in the period 2007-2009
Sources of funding Project name Institution in
charge
Estimated project value (EUR)
Own funds External
Planned time of project
implementation
1. Interconnection of the Tax Administration and Customs Administration IT system relating to international trade and relevant procedures
MFin * ** 2007-
2. Customs Administration – Modernisation of border crossings
- Equipping the border crossings
MFin
25,000,000
** 2007- 2009
83
3. IT support to the integrated customs system of Serbia, and further development of e-customs.
MFIN
3,000,000*
** 2007
4. Coordination and interconnection of competent agencies and regulatory bodies, domestic and international, in the fight against corruption within the Customs
MFIN
** 2007-
5. Project of improving the information processing unit within the Money Laundering Prevention Administration
MFIN
200,000
** 2007-
6. Creation of systematic and reliable reporting system within the Customs Administration; Improvement of the risk analysis system
MFIN
1,000,000*
** 2007-
7. Improvement of the budget planning process
MFIN 2,000,000 ** 2007
8. Procurement of equipment for the Ministry of Finance conference hall
MFIN
80,000
** 2007
9. Development of software for monitoring and supervision of foreign-currency and foreign-trade transactions
MFIN
500,000
** 2007
10. Treasury Administration – Local treasuries
project – Notarial system
support project – In-house S.A.
certification project – Project of legal
drafting and setting up the state aid control bodies
– Registers of concession contracts, state aid, public enterprises
– Modernisation of IT-communication network and IP telephony
- Document management system
– Training for direct (approx. 100) and indirect (approx. 3,500) users of budget funds with the aim of developing skills for the operation in accordance
MFIN
* 150,000 500,000 1,000,000 200,000 850,000
** 2007
84
with the permanent Treasury system
– Project of legal drafting and setting up the state aid control bodies
- necessary feasibility study at the MF level, with mandatory participation of foreign consultants with the aim of estimation of required funds. It is necessary to involve the funds of an accessible EU program
11. Development of the study on possibilities to reduce tax burden of the economy
MFIN * ** 2007
12. IT support to the integrated tariff of Serbia TARIS
MFIN – Directorate for IT
* **
13. Procurement of computer equipment for the budget sector
MFIN – * **
14. Education of employees in the Fiscal System Division
MFIN – * **
15. Training, expert assistance, and software for the Division of Macro-Economic and Fiscal Analysis
MFIN – Division of Macro-Economic and Fiscal Analysis
500,000* **
16. Combating corruption, and strengthening the Customs Administration integration
MFIN – *
**
17. Implementation of the Tax Administration IT strategy:
Implementation of the system for tax payer registration
MFIN-Tax Administratio
n
400,000
400,000
2007
18. Tax accounting project MFIN-Tax Administratio 500,000 500,000
2007-
85
Source: Ministry of Finance *It is necessary to estimate the value of project, and the structure of funding sources, in cooperation with the line ministry and competent institutions ** The funds will partly be provided from own funds and, at this moment, it is not possible to estimate the amount of such funds. Approx. EUR 43 million, envisaged within the NIP to be allocated for the strengthening of IT capacity of public institutions (e-Serbia), in the period until 2008. A part of these funds will be used for the implementation of some of the proposed projects.
n
19. E-tax project
MFIN-Tax Administratio
n 300,000
300,000 2007-
20.System of decision-making support ;
Improvement of the risk analysis system (Enterprise Data Warehouse)
MFIN-Tax Administratio
n 600,000
600,000 2007-
21.Specialist IT training MFIN-Tax Administratio
n 200,000
200,000 2007-
22. Call Centre project MFIN-Tax Administratio
n 1,200,000
1,200,000
2007-
23. Distance learning system (DLS)
MFIN-Tax Administratio
n 250,000
250,000 2007-2009
24. Improvement of the equipment level in the Tax Administration – procurement of 1210 lab cannons for field inspectors in the Tax Administration
MFIN-Tax Administratio
n 1.210.000
1.210.000
2007
25. Data recovery and Forensic Project
MFIN-Tax Administratio
n 180,500
180,500 2007
26. IT interconnection of the Fiscal Police Division Project
MFIN-Tax Administratio
n 63,500
63,500 2007
27. Technical equipment of the Tax Police Division and training of inspectors for the Law on Criminal Procedure
MFIN-Tax Administratio
n 60,000
60,000 2007
28. Procurement of cars 150 in 2007 50 in 2008 50 in 2009
MFIN-Tax Administratio
n 2,125,000 778800 856680
2,125,000 778800
856680
2007 2008 2009
29. Procurement of computer equipment for the Tax Administration Headquarters
- 150 work stations, and 150 printers
MFIN-Tax Administratio
n 25,000
25,000 2007
86
Annex to the table:
1. For the priority under no. 1, it is necessary that the involved representatives of the
Tax and Customs Administrations agree on the manner for interconnection and
introduction of the Tax Administration in the SEW (Single Electronic Window)
Project; therefore, at present it is not possible to define the need for foreign
assistance.
2. For the priority under no. 3, the future SEW should include, namely it should be
open for inclusion of all government authorities and the representative of business
community taking part in foreign trade, and the above amount, along with what
was thus far invested, should cover the completion of the system, both with regard
to hardware and the software.
3. For the priority under no. 4, the Tax Administration participated in the tender with
the Ministry for International Economic Relations in 2005 to be awarded the funds
from the Government of Norway grant. The project was not accepted and the
Customs Administration did not take part in the 2006 tender because it financed a
larger part of its activities from other sources so that the numbers from the table
were accordingly erased.
4. For the priority under no. 12, the Customs Administration participated in 2006 in
the tender with the Ministry for International Economic Relations to be awarded
the funds from the Government of Norway grant. The project proposal was
accepted under designation B and, according the coordinator for the Government
of Norway grant, the funds should be disbursed by the end of first quarter 2007.
5. Opinion of the Division for Macro-Economic and Fiscal Analyses is that, in the
coming period, it is necessary to strengthen the capacity of this Division
concerning:
- Setting the mid-term macro-economic fiscal goals,
- Projections of macro-economic and fiscal indicators, and
- Setting the economic policies and structural policy.
Project under no. 15 would be composed of five components:
a. Procurement of IT equipment and other equipment (note-books, projectors,
printers, servers, etc);
b. Facilitation of the access to Consensus Forecasts projections (projection for
the G-7 countries, the Western and Eastern Europe, Asia, exchange rates of
major currencies in the world); interconnection with the Bloomberg system
with the aim of using the latest data about the developments in the financial
87
and commodity markets in the world, the most important economies, and data
exchange with the system (forwarding the latest data about the Serbian
economy to this global network), subscription to the Economist and Platts
(with the purpose of monitoring the developments relating to energy prices),
and procurement of expert literature;
v. Financing of the lectures of local and foreign experts, involvement in
individual analyses together with local and foreign experts;
g. Organisation of study trips abroad with the purpose of learning about the
experience of other foreign institutions;
d. Development of own software solution for macro-economic and fiscal analyses,
generation of a database, and procurement of other programs for the conduct
of analyses.
Cost estimate:
1. Component 1 ...................... EUR 30,000.-
2. Component 2 ,..................... EUR 100,000.-
3. Component 3 ...................... EUR 100,000.-
4. Component 4 ...................... EUR 110,000.-
5. Component 5 ...................... EUR 120,000.-
Other costs ....................... EUR 40,000.-
Total ...................................... EUR 500,000.- (preliminary estimate)
The goal of this project would be to add on the DFID project (support to the Ministry
of Finance in strengthening of mid-term framework of expenditures) which is in
progress, and to strengthen the capacity of the Division of Macro-Economic and
Fiscal Analyses; therefore, it should be checked whether there is any possibility that
DFID provides additional finances for these components so that both the DFID
Project and the Division for Macro-economic and Fiscal Analyses would successfully
attain their planned goals and continue their cooperation until the end of 2009.
In view of planning and implementation of the Government of the Republic of Serbia
economic policy, and in particular in the context of future integration into the EU, the
role of the Division for Macro-economic and Fiscal Analyses will be to prepare pre-
accession economic programs and report to the EU about the most important macro-
economic and fiscal developments. The donation would enable the capacity building
process to be continued and, consequently, the Division would be able to effectively
perform the tasks set before it.
88
3.2. Public administration and local self-government
Public administration constitutes the general framework for operation of regulatory,
executive, and supervision state institutions. The Ministry for Public Administration
and Local Self-Government works on the implementation of activities set in the
Strategy for Public Administration Reform in the Republic of Serbia that was adopted
in November 2004. The Strategy is based on general principles of the European
Administrative Space and good governance, as well as the concept of open
government. Strategic management of the public administration reform has been
entrusted to the Council for the Public Administration Reform. The Action Plan for
Implementation of the Public Administration Reform in the period 2004-2008 includes
the following activities: decentralisation, generation of legal framework for
development of professional public administration, creation of the environment for
implementation of the new framework of public administration, human resources
management, modernisation – introduction of information technologies, and
development of control mechanisms. Also, in 2004 and 2005 the National Assembly
adopted a set of critical laws (Law on Public Administration, Law on Civil Servants,
Law on Ombudsman, Law on Prevention of the Conflict of Interest in Performance of
Public Duties, Law on Accessibility of Information of Public Interest, Law on
Electronic Signature, and Law on Public Agencies), and, which is of utmost
importance, the National Anti Corruption Strategy was adopted. The Law on Public
Administration provides for the application of all key principles of the Strategy of the
Public Administration Reform in the Republic of Serbia, while the Law on Civil
Servants regulated the status of public employees and defined the specific
obligations, rights, and responsibilities, and the principles for establishment and
termination of employment. These and other laws established the appropriate legal
framework that enables building of a professional, de-politicised and decentralised
public administration. The envisaged period for the fulfilment of these requirements
for the attainment of modern and streamlined administration is until 2008. This
coincides with the commencement of negotiations for accession of the Republic of
Serbia to the European Union and is vital, considering that the situation in public
administration will be an important parameter for the negotiations for accession to the
European Union. The reform of public administration is a precondition for successful
reforms of other segments of the society and is strongly linked to them.
With regard to the public administration and local self-government, a number of
reform projects were implemented in the recent period, with donors’ financial support,
89
oriented, primarily, to technical and human resource capacity building in the Ministry
and some municipalities (Table 12a).
Most important projects in the public administration and local self-government sector in the period 2000 – 2005: 1. Assisting the Government in
implementation of the program of democratic reforms 1,000,000 EUR Norway 2001-2006
2. Development of modern human resource management in public administration 3,700,000 EUR Sida 2002-2006
3. Strengthening of the capacity for management of the public administration reform 400,000 GBP DfID 2002-2005
4. Support to strengthening of the Ministry for Public Administration and Local Self-Government 1,500,000 EUR EAR 2003-2006
5. Support to administrative capacity building 609,000 EUR
French Government 2003-2006
6. Program of assistance to the municipalities of Eastern Serbia
17,000,000 EUR
EAR, own funds of local self-government authorities 2003-2006
7. Implementation of the reform of salary and grade system in the public administration in the Republic of Serbia 2,000,000 EUR EAR 2005-2007
8. Program of assistance to municipalities, stage 1
2,000,000 EUR (4, 335, 000. 00 CHF) SDC 2001-2004
Reform of public administration is based on the laws that were adopted: the Law on
Public Administration and the Law on Civil Servants, which lay the foundations for
modern public administration. The Law on Public Administration provides for the
implementation of all key principles of the Strategy of the Public Administration
Reform, while the Law on Civil Servants regulates the status of public employees and
defines the specific obligations, rights, responsibilities, and principles for
establishment and termination of employment. These Laws established a suitable
legal framework which enables building of a professional and depoliticised public
90
administration. Depolitization will result in clear distinction between the process of
political decision making and the process of their implementation. Creation of a well-
trained, accountable and efficient administration will be ensured through the
implementation of professionalization principles. Training and further education of
employees were set as a priority at the first stage of the public administration reform,
and, to ensure continuity of reforms, it is necessary to set up the mechanisms for
long-lasting and continuous improvement of civil servant skills. The most cost-
effective way to attain this goal is to set up a single training centre which will provide
the top quality level of training. With the aim of building a modern, efficient and
economical public administration, now in progress is the reform of the remuneration
system. The goal is to establish a fiscally sustainable salary system within which
performance would be awarded according to the volume and complexity of work,
responsibility level and extent to which it contributes to overall efficiency and
performance of all public administration authorities.
Rationalisation implies the optimally organised public administration which provides a
satisfactory quality level of services with the least possible number of operators and
reduction of total labour costs. One of the main activities oriented towards
rationalisation is a realistic estimation of the number of operators required for each
individual job, which involves functional analysis of the jobs to be done by each
individual authority. It will be conducted in 2007 in all RS authorities, in cooperation
with the Ministry. Clear division will be made between the competences and jobs of
different public administration authorities so as to avoid overlapping and, accordingly,
determine the number of operators required. The new organisation will start from the
horizontal analysis of functions, structures, procedures and processes, at the level of
entire country, and vertical analyses at the level of individual institutions. This
process will be supported by the professionalisation and modernisation of public
administration. Legal framework building will be continued and that will be the
foundation for new institutional forms of performing public services, such as
regulatory bodies and public agencies to which competences of the public
administration authorities will be transferred, in a gradual and controlled manner.
With the aim of further improvement of the administrative procedure in public
administration bodies, and supervising the lawfulness and correctness of their work,
the Ministry for Public Administration and Local Self-Government will, in 2006, finish
the work on the preparation of the new Law on General Administrative Procedure
which, among other things, regulates the supervision over the operation of public
administration, and the Law on Administrative Disputes, which will provide for judicial
91
review of the work of the administration. Moreover, the implementation of the Law on
Ombudsman will provide a specific form of external control over the work of public
administration. In this way, a complete and comprehensive mechanism for the
supervision of the work of public administration will be in place.
Modernisation principle pertains to the technical and technological improvement of
the operations of public administration authorities with application of modern IT and
communication technologies. To this effect, generation and use of integrated
databases will be ensured, as well as the establishment of a single system of
communication between public administration authorities in the entire territory, along
with the introduction of electronic business and electronic signature in the operations
of the public administration authorities. Investing into the modernisation requires
quite large funds; however its outcome contributes to the decrease of labour costs in
public administration bodies. Introduction of information technologies into the
operations of public authorities at the central and local level will be implemented
through the establishment of a common information system, as defined in the draft
National Information Society Development Strategy. The goal is to provide the public
with easier access to information and enable them to perform some specific tasks,
and to increase operating efficiency along with reduction of costs.
Division of authority between the central and local levels of government is one of
critical requirements for general democratisation of the society. The decentralisation
process will develop gradually, in accordance with the Strategy of the Public
Administration Reform in the Republic of Serbia which defines main principles and
models of the decentralisation process and fiscal decentralisation, but also in
accordance with the legal framework that governs these issues. The Action Plan for
the implementation of public administration reform envisages an analysis of
operations of the local self-government authorities which will be continued in 2006
with the aim of having the capacity at the local level properly estimated and the
strategy of their capacity building implemented. Based on the previous analysis, and
in the light of the adoption of the new Constitution, the Ministry will prepare draft
amendments to the existing laws pertaining to the local self-government, namely, it
will draft a new set of laws pertaining to these issues. The decentralisation process
will be synchronized with the process of fiscal decentralisation because, when
transferring the authority to the local self-government it is necessary to identify the
resources from which local self-government will finance the performance of tasks it is
delegated. The process of fiscal decentralisation will unavoidably introduce some
changes in the public revenue system, but also in the definition of measures oriented
92
towards the control of risks from the over-indebtedness of local self-government. The
prerequisite for fiscal decentralisation is that the local level of government pursues
public expenditures and public revenues policies that are best suited to the citizens’
needs, while assuming the responsibility to provide best quality of services and to
ensure that costs are optimal. Fiscal decentralisation will be founded on clear
definition of roles and responsibilities of different levels of government in the country,
transparent identification of the title over public revenues, autonomy of local
government at both the revenue and expenditure side, and setting up of suitable
institution which will be administratively and technically capable to efficiently perform
tasks and duties. The goals of the stabilisation of economic policy and a better
capacity for the administration of more complex tax forms, such as value added tax
and synthetic income tax, require a certain degree of fiscal system decentralisation.
To be able to efficiently control macro-economic developments in the country, the
central government needs suitable instruments, including fiscal ones. If the central
government excessively decentralises the tax system, it could significantly reduce its
capacity to use the fiscal policy measures for attainment of macro-economic goals.
The prerequisite for both decentralisation processes is human resource and material
capacity of local self-government authorities to autonomously assume performance
of their new competences. Material capacity will be mostly ensured through the
process of fiscal decentralisation which will be in line with the decentralisation of
tasks, but also through creation of constitutional and legislative grounds for the
existence of local self-government’s own property. Within the human resources
capacity of local self-government authorities, the Ministry will provide any assistance
needed for the analysis of local government capacities and creation of plans for their
building. A part of this process implies the adoption of a specific Law on the
Employees in Local Self-Government Authorities.
The greatest problem in the coming period will be the implementation of the
regulations and strategies which are already in force. Necessary for the
implementation as such is to accelerate the special forms of capacity building,
intensify the interministerial coordination and coordination between different levels,
improve the work of inspection bodies, and ensure the political will for the
implementation. In its work, public administration must respect European principles,
namely: correctness and predictability (legal protection), founded on lawfulness and
impartiality; openness and transparency (allowed exceptions include national security
and security of personal data); efficiency (accountability in the use of public funds)
and effectiveness (attainment of goals adopted in the legislation). Potential conflict
93
between the efficiency and rule of law on the one side, and lawfulness on the other
side, must be resolved by separating the adoption and execution roles, as functions
of the administration; thus, the administration adopts public policy and conducts
supervision, and the execution as such is delegated to contractors.
In the paper titled European Partnership it is clearly underlined that the success of
the EU integration process is entirely dependent on the public administration reform.
Therefore, this document identifies public administration reform as one of six key
short-term priorities. Mid-term priorities that are defined by this document and pertain
to the public administration sector include: strengthening of the EU integration units
within the ministries, full application of the Law on Public Administration and the Law
on Civil Servants, implementation of measures for human resource strengthening of
public administration, establishment of a centralised system for payroll processing,
and adoption and implementation of reforms in view of the decentralisation so as to
consolidate the capacity of local government.
It may be summed up that, in the coming mid-term period, the Ministry for Public
Administration and Local Self-Government will be facing the following key
challenges:
• Creation of the environment for efficient decentralisation;
• Full application of the Law on Civil Servants and the Law on Public Administration;
• Raising the level of public administration services and improving the mechanisms
for control of lawfulness;
• Improvement of the public administration organisational efficiency and further
application of information technologies;
• Strengthening of local self-government.
With the purpose of attaining the above goals, implementation of following project is
proposed for the coming mid-term period (Table 16).
94
Table 16. Priority projects in the sector of public administration and local self-government in the period 2007-2009.
Sources of funding sources
of funding Project title
Institution in charge
Estimated project value (EUR)
Own funds
External funding sources
Planned start of project
implementation
1. Support to the inclusion in the work of the Regional School for Public Administration
MPALSG 3,000,000 ** 2007
2. Support to the local self-government development through strengthening of the Ministry for Public Administration and Local Self-Government
MPALSG 400,000 ** 2007
3. Support to the implementation of new legal framework
MPALSG 200,000 ** 2007
4. Strengthening of local self government in the Republic of Serbia
MPALSG 2,000,000 ** 2007
5. Strengthening of local self-government units in view of management of EU funds
MPALSG, MIER
2,000,000 ** 2007
6. Support to the establishment of the Ombudsman’s Office
MPALSG 1,000,000 2007
7. Strengthening of administrative inspection
MPALSG 1,000,000 ** 2007
8. Support to the Strategy of the Public Administration Reform in the Republic of Serbia (phase 2)
MPALSG 1,853,000 ** 2006-2008
9. Creation of the environment for introduction of the decentralised implementation system for the EU funds
Government 6,000,000 ** 2008
10. Preparation of the public administration in the Republic of Serbia for the European administrative space
SEIO, MPALSG
2,000,000 ** 2008.
11. Support to rationalisation process
MPALSG 200,000 ** 2007
12. Support to the implementation of the information society development
MPALSG with other competent authorities
and services
* ** 2007
Source: Ministry for Public Administration and Local Self-Government
95
* It is necessary to estimate the value of the project and structure of the funding sources, in cooperation with the line ministry and competent institutions. ** Funding will be partly provided from own funds and, at this moment, the amount of these funds can not be determined.
3.3. Economy
In the past period, the Ministry of Economy successfully performed some significant
reform tasks. In the period 2002-2005, 2,214 companies were privatised, financial
effect of EUR 2 billion of revenue was realised, EUR 1 billion were provided for
investments, and EUR 279 million for the social program. The restructuring process
has started in large socially-owned enterprises with big business and financial
problems, military industry, and public enterprises of importance for the Republic.
In the period between 2001 and 2006, 74 large socially-owned enterprises were in
the process of restructuring in view of privatisation, with the total number of
employees of more than 155,000. The main goal of restructuring is to prepare these
large systems for successful privatisation, namely for their sale to successful
investors, and to preserve as many jobs as possible. In this regard, bankruptcy and
liquidation are planned for their parts which do not have any economic justification.
After their restructuring was completed, before June 2006, 44 companies were
privatised, of which 11 as whole companies and 33 as their subsidiaries. This
process gained particular speed in June 2005 after the new solutions were
incorporated in the Law on Privatisation („Official Gazette of RS'', Nos. 38/01, 18/03,
and 45/05). Since then, 33 large business systems have been restructured and
offered for sale, all in their entirety. At the same time, seven companies under the
restructuring process were subjected to bankruptcy.
Preparation of state-owned companies for privatisation was also intensified in years
2004 and 2005, through their restructuring (reorganisation, financial consolidation,
resolution for redundant employees), and upgrading of the legislative framework for
the privatisation of this form of property. The greatest progress in the preparations for
privatisation was made in the case of NIS. The Government has adopted the
Strategy for Privatisation of NIS and, in accordance with the adopted Strategy, now in
progress is the tender documentation preparation by the advisors.
The Government has adopted the Decree on the percentage of capital that may be
privatised in the majority state-owned companies conducting the energy activity as
their core activity („Official Gazette RS'', No. 63/06) which provides that a percent of
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capital that may be sold in such companies under privatisation may not exceed 70 %
of the total capital of the company under privatisation, and that the Government
determines this percentage for each individual company under privatisation.
For other large public enterprises in the Republic of Serbia (EPS, JAT, ŽTP, PTT ...),
privatisation strategies have not been adopted yet. However, in the case of EPS,
JAT, and ŽTP, the capital was transferred to the Republic of Serbia, as far as their
non-core activities are concerned and for them the privatisation process has been
initiated and is conducted by the Privatisation Agency. For the above enterprises, the
process of resolving the issue of redundancies has also begun, through
implementation of social programs as one of the measures taken in view of the
pending privatisation.
The pace and degree of the privatisation of state-owned enterprises are not
regulated by the law. Rather, they will be defined for each specific case through
privatisation strategies and programs which will be verified (adopted) by their
respective founders and account will be taken of the specificity of the business
activity in which a respective enterprise is involved.
In 2005, out of 100 companies which need to be restructured before the
commencement of the privatisation process, restructuring process was initiated for
18 companies and calls were announced for 35 companies, 13 companies were
privatised after successful implementation of the restructuring process, and 34
companies are now at different stages of economic-financial consolidation.
In the period from 2001 to 2004, restructuring of the public enterprises that provide
infrastructure related services (such as electricity, telecommunications and postal
services, oil and gas, rail and air traffic, forests, water, and similar) developed at a
lower pace. In 2005, restructuring process of the Republic public enterprises gained
speed in respect of decreasing the number of employees under the severance pays
provided from the budget funds, reduction of debts through write-off of government
claims, and splitting up of large companies into their core and non-core activities,
along with the preparation for their privatisation. Contributing to the acceleration of
privatisation in 2005 were the legislative amendments through which the Privatisation
Agency gained the right to autonomously terminate contracts with the buyers if the
latter fail to perform their contractual obligations. A conditional write-off of
government claims was introduced, which provided the possibility for government
creditors to collect what is owed to them from the privatisation income and made it
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impossible for the directors to prevent that their respective companies’ shares are
traded on the market by refusing to sign the prospectuses.
By setting up the Agency for Small and Medium Enterprise Development at the level
of the Republic, in June 2001, and by expanding the network of these agencies
throughout the territory of the country, by adopting the SME and Entrepreneurship
Development Strategy in January 2003 and the Law on Guarantee Fund in May
2003, the legal, institutional and strategic foundations were laid for faster
development of the SME and entrepreneurship sector (SMEE). Since 2001, the
environment for SMEE business and development has considerably changed, at the
national, regional, and local level. Legal and institutional framework for SME
operation was reformed, the level of skills and knowledge for the work in SMEs was
raised, institutions for their financial support were built, and statistical monitoring of
SME performance was improved. Analysis of the development level of small and
medium enterprises shows that this sector is the most vital and economically most
efficient segment of the economy and that it is gaining importance in the
implementation of structural reforms, particularly with regard to opening of new jobs
and enlivening of the growth of overall economy. With the dominant share in the
number of active companies (99%), this sector accounts for approx. 55% of the
employees in the economy sector. SME sector has realised above-average
qualitative indicators of development in 2004 and 2005, and small enterprises were
most profitable.
Most projects that were implemented under the auspices of the Ministry of Economy
in the past period were focused on SMEE development, raising the competitiveness
level of companies, supporting the privatisation process, restructuring of socially-
owned enterprises, capacity building of the institutions involved in above processes,
credit support through the Development Fund, and programs for revitalisation of
production in specific regions.
The most important projects in the economic sector in the period 2000-2005: 1. ''Non-financial support to the SME
development in Serbia'' Project 3,600,000 EUR EU 2001-2004
2. Project on distribution and use of the funds for credit support to the economy through the RS Development Fund
30,000,000EUR annually
Budget 2002-
3. Program of distribution and use of the funds for lending for the lease-out of domestic machines and equipment 10,000,000 EUR annually Budget 2003-
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4. Program of the use of funds for promotion of regional development, namely for credit incentives for of the employment and revitalisation of production in the City of Kragujevac, municipalities of Bor and Vranje, and 13 underdeveloped municipalities 10,000,000 EUR annually Budget 2005-2006
5. Program on distribution and use of the funds intended for micro-loans for employment program 10,000,000 EUR annually Budget 2005-
6. Development of the National Economic Development Strategy of the RS in 2006-2012 80,000 EUR Budget 2006
7. APEX global loan for SMEs 65,000,000 EUR EIB 2002-
8. Pilot project on the competitiveness and economic efficiency USAID
9. Serbian Economic Efficiency Project * USAID 2003-2007
10. Promotion of the private sector and employment in the Republic of Serbia ** GTZ 2003-2010
11. «ENTRANSE»- project of the support to the development of business incubators in the Republic of Serbia
Government of the
Kingdom of Norway
12. Support to the Privatisation Agency EU 2003-
13. Development package-credit lines for SMEs 34,000,000 EUR Italy 2004-
14. Pilot project for the promotion of cluster development 100,000 EUR Budget 2005
*local partner SIEPA (Serbian Investment and Export Promotion Agency). Planned time for completion of the project – July 2003 - April 2007 **local partner SCC (Serbian Chamber of Commerce). Planned time for completion of the project: September 2003 - December 2010
Privatisation of the socially-owned enterprises will continue at a greater pace, with
the purpose of making a more significant contribution to the development and
increase of efficiency of domestic economy, increased investments into new
production technologies, improvement of export results and increase of employment.
To this effect, completed will be the process of auction privatisation of socially-owned
companies and sales of large companies to strategic investors through tender
procedure. At the same time, insolvent companies will be privatised through
bankruptcy procedure and, by the completion of the privatisation of socially-owned
sector, the sales of the stocks from the Share Fund of Serbia will be brought to an
end and thus the privatisation will be finished of those socially-owned companies
which were partially privatised. The Privatisation Agency will speed up the tender and
auction privatisation, restructuring of companies, and sales of companies through
bankruptcy procedure. The plan is to conclude the privatisation of socially-owned
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companies before end of the first quarter of 2007, and, with regard to the state-
owned and public sector, the privatisation of more than 50% of companies should be
privatised before end of 2010. Also, it is necessary to continue and speed up the
bankruptcy procedure in over-indebted companies so as to lower the fiscal loss, as
well as to speed up the restructuring process and resolution of the issue of redundant
employees. Shares from the Share Fund portfolio should be sold before end of 2008
and, pursuant to the Law on Privatisation; cumulated shares from the Privatisation
Register should be transferred to the citizens who meet the relevant requirements,
before end of the first quarter of 2007. The method of the public offer of shares will
make possible that the companies develop with strategic investors and social
program. Small shareholders will be given the opportunity to have shares in different
companies, which will provide systemic protection and ensure equity and social
support to the privatisation. Adoption of the Law on Acquisition and the Law on
Investment Funds will create even better institutional conditions for more efficient
functioning of the capital market, and for the successful sale of the shares from the
Share Fund portfolio. Privatisation revenue will mostly be used for the development
purposes, within the NIP. Privatisation revenue will be partly used for the
capitalisation of the state pension fund which will be transformed into an institutional
investor.
The greatest challenge in the coming period will be the restructuring and privatisation
of large socially-owned and public enterprises. These enterprises made losses over
many years, have accrued huge liabilities, mostly have negative capital, they are
conglomerates without specialisation and with huge redundancies. They have
survived the transition thanks to the soft budget restrictions, namely the government
subsidies and melting of these enterprises’ capital, which was the reason to have
them restructured before privatisation. During the five years of transition, no firm
budget restriction was established for all enterprises from the group of enterprises to
undergo the restructuring process. Also omitted was the implementation of
bankruptcy procedure, with the aim of settling the insolvent debtors’ debts. The
slowing down of the restructuring of public enterprises has had the impact of
increased public consumption and unrestructured and unprivatised socially-owned
and state-owned companies, which are not able to export, contributed to a large
foreign trade deficit. It is therefore urgent to accelerate the process of real sector
restructuring, since this would have a positive effect on the economic efficiency of
economy and public finances. The acceleration of the restructuring of these
companies will greatly be helped by new legal solutions in the form of a write-off of
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debts towards the state and shortening of the bankruptcy procedure. Restructuring of
public enterprises in the Republic of Serbia will be accelerated in such a way that
strategic development plans and restructuring programs will be shortly adopted for
these enterprises. The Government will, upon previous agreement with the
interministerial Commission for Restructuring of Public Companies, shortly adopt
strategic development plans and restructuring programs for each individual public
enterprise. Special focus will be placed on the privatisation of public utility companies
whose founder is the local self-government. Main institutional framework for the
privatisation of these companies has been defined, and the issue of free shares was
separately defined. The privatisation model will not change and privatisation of these
enterprises will be implemented in compliance with the main provisions of the Law on
Privatisation. In view of the monopolistic character of a large part of the public
services provision, privatisation of public utility companies is a complex task. Based
on the Privatisation Strategy of Public Utility Enterprises, a suitable institutional
environment will be created for their privatisation. At the same time with the public
utility enterprises preparation for privatisation (reorganisation, spinning off of non-
core activities, reduction of the number of employees), different aspects of
cooperation with private sector will be developed, based on contract awarding,
concession granting, and competition strengthening in this economic sector (PPP –
Public Private Partnership).
The SME sector has achieved a considerable growth, as it was mentioned earlier,
but it is still facing significant challenges. The SME sector is facing expensive and
lengthy procedures necessary to obtain different licences and permits, barriers for
start-up of business and entry into market competition, relatively high tax burden
which discourage the registration and development of SMEE business, inefficient and
prolonged proceedings for business disputes, unregulated conditions for the use of
real estate and moveable property. Also, the flexibility and mobility of the labour
market is not sufficient, conveniences for the SMEE sector on the capital market are
not sufficient, the procedures for public procurement and environmental protection for
SMEE are rigid, etc. SMEE sector is facing an inadequate support from educational
institutions at all levels of education in respect of entrepreneurial knowledge and
skills. Formal and informal education did not to any significant extent develop the
offer of the entrepreneurship related educational content through the curricula,
trainings and seminars, while, on the other hand, the SMEE owners and managers
insufficiently use the consultancy service market. In the end of 2005, the Government
adopted the Plan for the encouragement of development of small and medium-sized
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enterprises and entrepreneurship in the period 2005 – 2007, whose implementation
will facilitate this sector’s access to funding sources, strengthening of links with the
education and science-research system, application of information and
communication technologies in business operations, etc. Implementation of the Plan
will be monitored by the SMEE Council as an interministerial body of the
Government. Annual action plan for promotion of the SMEE sector development will
define the goals, measures, timelines for completion, and the amount of required
funds for implementation of individual measures which will be operationalised in
annual plans of line ministries. Specific attention will be devoted to start-up projects,
and the unemployed will be provided the loans with favourable annual interest so that
they can start their own business. Building of the institutional infrastructure in
financial support will be continued through the setting up of the initial capital fund,
development of the guarantee fund function, and network of local and regional credit
and guarantee schemes for SMEE. Integrated information systems will be built and
statistical and business information critical for the development of SMEs and market
economy will be provided in them, investment risk will be lowered as well as the risk
premium charged by the grantors of loans. Monitoring function of the developments
in SMEE sector will be established in accordance with the EU standards (SMEE
Observatory).
The preparation of the Operating plan for the improvement of conditions for
entrepreneurship lending, increase of the competitiveness level, and improvement of
the entrepreneurial infrastructure is under way. Amendments to the Company Law
will be prepared so that this Law will regulate the entrepreneurs’ business operations
too. These activities will further speed up the development of SMEE sector. The
Government will remove the barriers for opening of new small and medium-sized
privately owned enterprises, and the barriers to strengthening of competition. It will
also create equal conditions for all business operators. With the purpose of
encouraging the SMEE development, the Council was set up as an interministerial
body. It will play a significant role in implementation of the SMEE development policy.
Special focus will be placed on the creation of the institutions of financial market
adjusted to the need of small and medium-sized business operators. Key directions
of support to the SMEE development include: improvement of the stimulating
business environment for SMEE incorporation and development, raising the
knowledge and skills level of the management and employees of small and medium-
sized enterprises (SMEs) through the education for entrepreneurship, building of
institutions for non-financial support to SMEE and development of non-financial
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services, support to the financial institution for the SMEE development and equality in
their access to capital market, development and implementation of innovations and
modern technologies, donor and developmental assistance in the implementation of
concrete programs and projects for SMEE development. For faster development of
SMEE, establishment of the network of regional centres for their development
throughout the Republic of Serbia and voucher system in provision of non-financial
services to SMEE will be provided, along with continuous media promotion of
entrepreneurship and measures of the support to strengthening of that sector, as the
generator of the growth of income and employment. The goal in the sector of small
and medium enterprises is to increase their number to 390,000 before end of 2008
and to employ 100,000 people within the same period.
Development of SMEE, as a pillar of sustainable economic development of the
Republic of Serbia, involves rising of the level of skills and knowledge necessary for
work in the SMEE sector. To this effect, entrepreneurship will be integrated into the
system of formal education, so that the education for entrepreneurship is represented
at all levels of formal education, as well as into the informal education and in the
system of lifetime education and training. Specific curriculum contents in primary
education will be devoted to informing the students about entrepreneurship. Within
the middle-term education, in the schools streamed in this direction, the
entrepreneurial knowledge and skills of importance for running a business will be
passed through suitable curricula, and through outside-school teaching programs,
mandatory and pilot programs which will grow into the regular programs for gaining
the qualifications for particular professions and profiles for work in SMEE sector. The
Republic of Serbia, through the European Agency for Reconstruction, has been since
August 2003 implementing the program reforms of professional education, with the
goal to, introduce a new method of school functioning, new educational profiles, and
new curricula, in 2007. University education will be enhanced with regard to
entrepreneurship and links will be strengthened between the university and science-
research institutions and the economy, with the intention of the entrepreneurial
education facilitating efficient employment and business running, technology transfer,
application of innovations, and development of new products and technological
processes. Development will be accelerated of the consultancy services market for
SMEE requirements that was initiated in 2002 by the EU Project "Non-financial
support to the development of SMEE sector in Serbia".
Financial support to the development of SMEE sector will be enhanced through
government instruments, international and bilateral credit arrangements and primarily
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through the development of financial markets (banks and other financial institutions,
private investment funds, venture capital networks, prices of credit guarantees).
Special focus will be placed on the financial support to the application of
technological innovations which influence the growth of competitiveness and SMEE
sector development on the basis of the introduction of new equipment, technological
processes and products and modern production and quality management. To this
effect, increased will be the SMEE sector capacity for the development and
implementation of modern technological innovations through their linkage with the
educational and research system and with competitive strategic partners and through
introduction of modern information technologies and through facilitated financing of
the SMEE innovative activities. Especially encouraged will be the introduction of
modern information technologies and e-business in the SMEE sector. Special
support will be provided to highly-innovative SMEE in fast-developing areas, such as
SOFTWARE industry. At the same time with improvement of financial instruments for
the support to SMEE, continuation of donor and developmental support will be
ensured, as well as the efficient coordination of different donor projects, with the aim
to have the SMEE sector development policy more efficiently implemented.
Also, in the post-privatisation period will be ensured consolidation of property and
introduction of efficient ownership structure in the privatised enterprises. In the cases
when the buyer of the company does not meet his contractual obligations, a
temporary agent of capital will be introduced. This solution will provide for the
lessening of conflicts arising after the privatisation, including the repeated
privatisation process or assignment of contract. Special attention will be devoted to
the accountability of the participants in the process for accuracy of the information
presented in the privatisation process. The Government will provide for adoption and
implementation of the law on records of former local owners and the law on
restitution and indemnity of former local owners from whom the property was, without
consideration, confiscated through sequestration, nationalisation, agricultural reform,
and expropriation of private property of domestic natural and legal persons. Also,
balance between the restitution and privatisation will be established, and indemnity of
former owners will take into account realistic capacity for provision of budget funds
and will not negatively affect the monetary stability and developmental prosperity of
the country. In the first phase, reliable data will be provided about the volume and
value of the property to be returned to former owners, as well as the efficient
operation of the competent Republic agency.
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The Government is continuously working on adoption and implementation of the
measures for improvement of investment climate in the country. Some of these
measures, in the ensuing period, will include:
• establishment of a special department within the municipalities, in accordance with
the One-Stop-Shop principle which will receive the applications for building permits
(and connections to utility services), collect all necessary documentation, and issue
licences;
• adoption of a law on property of local self-government, which will make it possible
for the municipalities to become the owners and to have disposal over the real
estate in their respective territories, as well as adoption of the new law on financing
of local self-government, which guarantees the fiscal decentralisation which will
encourage fiscal competition among municipalities;
• completion of cadastre records in the Republic of Serbia, based on the project
started in 2003 with the donors support, planned to be concluded in five years; it is
also necessary to create a statistical database about the land available for
construction and development of production and service business activities until
November 2006;
• application of a law on arbitration, which will in a simple and comprehensive
manner provide for recognition and execution of the awards made by international
arbitration and which will regulate the arbitration procedure for arbitration tribunals
seated in the Republic of Serbia, in the event the parties decide on application of
different rules and procedures;
• adoption of a law on industrial and technological parks, in which halls with full
infrastructure will be built and which will be leased out and sold to local and foreign
investors;
• adoption of a law on factoring, which will define a comprehensive legal framework
for internal and international accelerated collection of receivables;
• promotion of concessions as a form of cooperation between private and public
sector in a wide range of areas, and setting up of a suitable body at the
interministerial level, with the aim of defining the priorities, developing he activities,
and planning for the entire area of concessions; since a large number of
concession contracts is expected, it is necessary to establish suitable
administration for concession, which will be in charge for elaboration, analysis and
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studies that would serve as the expert basis for improvement and implementation
of the concession related policy;
• adoption of the law on promotion of balanced regional development of the Republic
of Serbia.
In the coming mid-term period, the Ministry of Economy will face the following key
challenges:
• Accelerating the pace of privatisation and restructuring of existing companies and
decreasing subsidies;
• Strengthening of business environment, with the aim of promoting the private
sector development, increasing the competitiveness, creating equal conditions for
market competition, and development of financial sector, with the aim of allowing
access to funding sources.
• Establishment of suitable administrative and regulatory environment for the
incorporation and functioning of new companies;
• Horizontal programs for encouragement of entrepreneurship (business incubators,
industrial parks, etc);
• Increase of productivity in companies, with gaining capacity for the entry into and
survival in highly competitive foreign markets;
• Development and increase of employment in the sector of small and medium-sized
enterprises and entrepreneurship;
• Implementation of the Economic Development Strategy of the Republic of Serbia;
• Adoption and implementation of the Balanced Regional Development Strategy of
the Republic of Serbia ;
• Strengthening of capacity in existing institutions (and development of new capacity
for regional development at the national, regional, and local level, in accordance
with the EU standards), as a precondition for the implementation of the Law on
Promotion of Balanced Regional Development of the Republic of Serbia.
After the country status changed and competences are transferred from the former
State Union, the Ministry of Economy is facing yet another key challenge–
Approximation of Legislation with the EU acquis relating to the internal market and
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free movement of goods, namely building of quality infrastructure. With the aim of
implementing the defined middle-term goal, the plan is to implement the Program for
Quality Enhancement (quality infrastructure) with nine projects included in Table 13b;
Implementation of above program is planned from budget funds and implies
establishment of legal and institutional framework for efficient performance of tasks in
the area of standardisation, accreditation and metrology, as well as with regard to
technical regulations and compliance assessment (preparation and adoption of
technical regulations; monitoring of their implementation- supervision; authorisations
and notification; keeping the register of regulations, and compliance assessment
bodies).
After setting up the legal and institutional framework, full implementation of this
middle-term requirement would considerably benefit from the international assistance
which would be oriented towards capacity strengthening of the compliance
assessment bodies and business operators in view of gaining full qualifications for
the application of technical regulations in compliance with the EU acquis.
In view of the implementation of priorities, the Ministry of Economy proposes, for the
coming period, the implementation of following specific programs and projects
(Tables 17a and 17b). Due to the nature of the project, envisaged in this segment, in
addition to donor funds and concession credits, is considerable participation of own
funds (budget and NIP). In addition to these programs, it is necessary to define, in
cooperation with the Ministry of Agriculture, Forestry and Water Management, the
programs of land reform and restructuring and privatisation of large farm holdings.
Table 17a. Priority investment projects in the economic sector in period 2007-2009 Note: values of projects in the Table are denominated in EUR at the exchange rate of 87.5 RSD/1EUR
Sources of funding
Project name Institution in charge
Estimated project value (EUR)
Own funds
External sources of
funding
Planned commencement
of project implementation
1. Projects on distribution and use of the funds for credit support to the economy through the Development Fund
MoE 36,572,00034,286,00032,000,000
36,572,00034,286,00032,000,000
2007 2008 2009
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2. Program for promotion of employment through approval of loans to legal persons and entrepreneurs
MoE
22,857,00022,857,00022,857,000
22,857,000 22,857,000 22,857,000
2007 2008 2009
3. Program for the use of funds for promotion of regional development for the cities of Kragujevac, Bor, and Vranje, and 13 underdeveloped municipalities
MoE
33,000,00039,000,00033,000,000
22,000,000 22,000,000 22,000,000
11,000,000 17,000,000 11,000,000
2007 2008 2009
4. Program on distribution and use of the funds for crediting the lease-out of domestic machines and equipment (Funds envisaged from other sources are not stated, considering that they, in compliance with the Program, are not recorded in the consolidated Treasury account)
MoE 14,286,00014,286,000
17,143,000
14,286,000 14,286,000
17,143,000
2007 2008 2009
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5. Program for crediting of unemployed natural persons, persons declared redundant, and innovators, through approval of micro- loans for self-employment (for 2007, NIP for 2008, and 2009 from the RS budget)
MoE 7,285,0007,285,0007,285,000
7,285,0007,285,0007,285,000
2007 2008 2009
6. Program for determination and enhancement of the existing institutional capacity, and development of new capacity for regional development at national, regional, and local level, in accordance with the EU standards
MoE 1,428,6001,600,000
714,300 800,000
714,300(IPA) 800,000(IPA)
2007 2008
7. Lending program aimed at the promotion of investment and increase of employment in underdeveloped areas (for 2007, NIP, for 2008, and 2009 from the RS budget)
MoE 12,628,500NIP
12,628,50012,628,500
12,628,500NIP
12,628,50012,628,500
2007
2008 2009
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8. Program for creation of industrial zones and parks (for 2007, NIP, for 2008 and 2009, from the Republic of Serbia budget)
MoE 39,256,000NIP
34,286,00022,857,000
39,256,000 NIP
34,286,000 22,857,000
2007
2008 2009
9. Micro-loans for self-employment
MoE
2,500,0007,500,000
2,500,000 7,500,000
(NIP)
2006 2007
Start up for beginners
MoE
2,000,0005,000,000
2,000,000 7,500,000
(NIP)
2006 2007
Start-up loans for beginners (initial capital fund) reform, investment loans
MoE 4,857,1434,857,1434,857,143
4,857,143 4,857,143 4,857,143
NIP
Project ENTRANSE 1*
MoE
3,085,714 3,085,714 2007
Project of creation of business incubators (6 incubators)*
MoE
617,143571,429571,429
617,143 571,429 571,429
2007 2008 2009
Project of creation of business incubators (14 incubators)*
MoE
900,0002,100,000
900,000 2,100,000
(NIP)
2006 2007
* In 2008 and 2009, these projects will be budgeted from the DZDM funds
* Amounts were transmitted from GOP (Annual Operational Action Plan), calculated as per the exchange rate: 1EUR=87.5 dinars
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Table 17b. Priority reform projects in the economic sector, in the period 2007-200930 Note: project values in the table are denominated in EUR, at the exchange rate of 87.5 RSD/1EUR
Sources of funding
Project name Institution in charge
Estimated project value
(EUR) Own funds
External sources of funding
Planned commencement
of project implementation
1. Preparation of the privatisation programs and the privatisation of remaining socially-owned companies
MoE 11,040,000 6,140,000 4,900,000 2007
2. Preparation of the program of privatisation and the privatisation of 500 companies from public (state) sector, in cooperation with other competent ministries
MoE 14,730,000 8,600,000 6,130,000 2007- 2010
3. Project of preparation and implementation of restructuring programs
MoE 4,908,000 1,227,000 3,681,000 2007
4. Overview of the final list of socially-owned enterprises which are not in the privatisation process
MoE 1,473,000 1,473,000
5. Definition of the conditions pertaining to the public sector privatisation, in the part relating to free shares for employees and percent of the sale of state-owned capital
MoE 859,000 859,000 2007
30 Within the National Investment Plan, i.e. Sectoral Plan for Economy for the year 2007, the following was envisaged: investment into creation of industrial parks in 50 municipalities in the Republic of Serbia, in the total amount of EUR 46 billion; investment in the development of local utility infrastructure in about 100 municipalities in the Republic of Serbia, in the total amount of about EUR 50 million; provision of micro and start-up loans, in the amount of about EUR 17 million; investment into export promotion, in the amount of EUR 15 million; investment in promotion of FDIs, in the amount of EUR 20 million; investment into development of business incubators for entrepreneurship promotion in 14 municipalities in the Republic of Serbia, in the amount of about EUR 3 million.
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6. Definition of the strategy for the sale of state-owned capital (and the percent of state-owned capital) in public enterprises
MoE 859,000 859,000 2007
7. Preparation of the project for the privatisation of construction and agricultural land
MoE 28,300 28,300 2007
8. Project of the conclusion of privatisation process in companies pursuant to the laws preceding the Law on Privatisation
MoE 1,915,000 1,669,000 246,000 2007- 2008
9. Project of the distribution of shares to citizens from the Privatisation Register, free of charge
MoE 148,000 148,000 2007- 2008
10. Provision of assistance for functioning and development of the SMEE Council*
MoE
51,42834,28634,286
51,42834,28634,286
2007 2008 2009
11. Support for functioning and development of the National SMEE Forum *
MoE
58,28646,85746,857
58,286 46,857 46,857
2007 2008 2009
12. Preparation of methodology for statistical monitoring of SMEE with the aim of joining the EU SME Observatory*
MoE
102,857102,857102,857
102,857102,857102,857
2007 2008 2009
13. Establishment of the voucher system
MoE 231,429125,714125,714
231,429125,714125,714
2007 2008 2009
14. Completion of the network of regional SMEE agencies and centres throughout the territory of the Republic of Serbia and subsidising their sustainability
MoE 57,14357,14357,143
57,14357,14357,143
2007 2008 2009
112
15. Strengthening and development of the institutional capacity (managerial and administrative) of employees with the Ministry and the Republic Agency for implementation of the SMEE policy *
MoE
79,42960,57160,571
79,42960,57160,571
2007 2008 2009
16. Project for the implementation of the principles of the European charter for Small Enterprises*
MoE
102,857102,857102,857
102,857102,857102,857
2007 2008 2009
17. Promotion of the implementation of the policy for support to the SMEE development in Serbia and holding the international SMEE conference*
MoE
56,57162,85762,857
56,57162,85762,857
2007 2008 2009
18. Project for financing of the activities of existing agencies /centres for SMEE development as a continuous task *
MoE
285,714285,714342,857
285,714285,714342,857
2007 2008 2009
19. Project of the research on the situation in SMEE sector until 2010*
MoE
10,28610,28610,286
10,28610,28610,286
2007 2008 2009
20. Encouragement of entrepreneurs for investment in the strengthening of productivity and innovations
MoE 2,000,0002,045,0002,545,000
1,650,000
645,000*
845,000*
350,000*
1,400,000*
1,700,000*
2007 2008 2009
21. Assistance for the internationalisation of companies
MoE 700,000700,000700,000
700,000
210,000*
210,000*
490,000*
490,000*
2007 2008 2009
22. Preparation of the methodology for statistical monitoring of the companies’ export performance
MoE 100,000 100,000 2007
113
23. Promotion of the introduction of productivity raising techniques
MoE 500,000500,000500,000
500,000 500,000 500,000
2007 2008 2009
24. Promotion of establishing links between companies and development of clusters
MoE 650,000900,000900,000
150,000630,000*630,000*
500,000 270,000* 270,000*
2007 2008 2009
25. Strengthening and development of institutional capacity (managerial and administrative) of employees in the ministry, for implementation of the policy for promotion of competitiveness
MoE 75,00050,00050,000
75,000 50,000 50,000
2007 2008 2009
26. Education of the Republic Development Office relating to monitoring and forecasting
RDB 300,000 300,000 2007
27. Creation of research and development SMEE observatory
RDB, MoE, RSO
RDA for SMEE
500,000 500,000 2007
28. Creation of legal and institutional framework for efficient performance of accreditation activities
MoE 488,500514,300457,100
488,500514,300 457,100
2007 2008 2009
29. Standardisation improvement
MoE 762,700800,000742,900
762,700800,000742,900
2007 2008 2009
30. Metrology Improvement
MoE 33,10034,30036,600
33,10034,30036,600
2007 2008 2009
31. Information system for measuring devices
OMPM 43,500 43,500* *
See Project 46,
2007 2008 2009
32. Accreditation of the laboratories of the Office for Measurements and Precious Metals (OMPM)
OMPM 142,900 142,900* *
See Project 46,
2007 2008 2009
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33. Pre-packaged products
OMPM 61,300 61,300* *
See Project 46,
2007 2008 2009
34. Creation of legal and institutional framework for adoption of technical regulations in compliance with the EU and their efficient implementation
MoE 102,90057,10045,700
102,90057,10045,700
See Project 45,
2007 2008 2009
35. Technical regulations and their implementation
MoE 584,000628,600685,700
584,000628,600685,700
see Project 45,
2007 2008 2009
36. Project of support to the companies in the preparation for obtaining a CE sign (five companies)
MoE 148,60068,60045,700
148,60068,60045,700
See Project 47;
2007 2008 2009
37. Project of technical assistance for capacity building, procurement of equipment, and transfer of a member state’s experience in creation of functional databases relating to technical legislation – under preparation
MoE 600,000 600,000 2008
38. Project of capacity building and equipping of metrological laboratories of the national organisation for metrology and compliance assessment bodies (CAB) – under preparation
MoE
2,500,000 2,500,000 2008
39. Project of assistance to companies in obtaining the CE sign (for 50 companies) – under preparation
MoE
3,000,000 3,000,000 2008/2009
115
* In 2008 and 2009 these projects will be budgeted from the DZDM funds
* Amounts were transmitted from GOP (Annual Operational Action Plan) and calculated as per the exchange rate 1EUR=RSD 87.5
3.4. Labour, employment and social policy In the past period, the Government of Serbia has elaborated a number of strategic
documents concerning the incentives for employment. The most important document
is the National Employment Strategy for the period 2005−2010, on the basis of which
the National Employment Action Plan for the period 2006-2008 was adopted. Of
critical importance to establish trend of sustainable employment growth is a dynamic
and sustainable economic development, based on the growth of domestic savings
and investments (private and public) and considerable inflow of direct foreign
investments. SMEE development, improvement of business and investment climate,
enhancement of financial incentives and support to the self-employment programs
will contribute to this. The Employment Strategy envisages increase of the
employment rate of young population (15 and 24 years of age) to 20% in the period
until the year 2010; increase of the share of labour force in the working population by
0.8% per a year, growth of employment at a rate of 1.5% per annum, decline of the
unemployment rate by 0.5% per annum in the survey investigations, and the rate of
registered unemployment by 19% per annum. It is envisaged that, through the reform
and integration of labour inspection, shift of employment from informal to formal
sector is ensured, which will produce decline of employment in the grey zone by
approx. 2% per annum. Besides, by enhancing the flexibility of formal labour market,
with faster growth of flexible forms of employment by 10% exceeding the growth of
standard forms of employment, it will effectively decrease the duration of
unemployment, while the accelerated reform process will provide for increase of
employment in the private sector. Suitable measures will produce decrease of
regional disparity of unemployment rates and women employment rate will be
increased, as well as the employment and activation of vulnerable populations (the
disabled, refugees, and the Roma).
The Strategy of Changes of the National Employment Service (NES) for the period
2005-2008 was adopted. This document envisaged the attainment, before 2010, of
the three most important employment- related goals: client- orientation, NES
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decentralisation and development, monitoring and evaluation of implemented
measures and activities oriented towards increasing the employment.
In the domain of social welfare, the most important document is the Strategy of the
Social Welfare Development, which goal is to develop integral social welfare with
accessible, quality and versatile services, with the aim of preserving and improving
the quality of life of vulnerable and marginal populations and individuals, and their
training for more productive life in the community, instead of dependence on the
social services. In the existing system of social welfare, there are two main programs:
social assistance to poorest families and child allowance. The existing social welfare
system is good and modern, and its main characteristics, such as the poverty line,
supplement to the poverty line, indexation of poverty line with the costs of living, etc.
should be retained. Introduction of the ''minimum level of social security'' in the
territory of Serbia in 2004 improved the access to social welfare, led to the increase
of the amount of social benefits and the number of families-beneficiaries of social
benefits in the poorest municipalities. Additional funds were approved from the
budget for this type of assistance through the increased amounts of transfers and
greater coverage of most vulnerable categories of the population.
Within the scope of work of the Ministry for Labour, Employment and Social Policy (in
cooperation with the Ministry of Finance) is the reform of state pension insurance,
which started in 2001 when the age limit for retirement was shifted, the contribution
rate was lowered, a new model for adjustment of pensions was introduced with which
the growth of pensions equally follows the growth of salaries and the growth of the
costs of living. Moreover, the reform was continued in March 2003 with the new Law
on Pension and Disability Insurance according to which the amount of pension is
determined according to the salary throughout the years of service. In this way, a
more direct link was established between the contributions and the amount of
pension. Also, the payment of contributions to all incomes was introduced.
Most projects implemented under the auspices of the Ministry for Labour,
Employment, and Social Policy in the past period were focused on the strengthening
of the Ministry’s capacity and institutional building of the labour market capacity,
implementation of a dozen pilot projects, and social welfare projects.
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The most important projects concerning labour, employment and social policy in the period 2000-2005: 1. Improvement of the social policy in Serbia 3,500,000 GBP DFID 2002-2005
2. Capacity Building Fund 440,840 USD UNDP 2003-2004
3. Development of the Serbian Labour Inspectorate for the needs of the XXI century
500,000 USD SAD 2003-2005
4. Development of integrated social welfare and improvement of professional work standards
1,749,900 EUR Norway 2003 –2006
5. Development of a unique war veterans’ disability protection
324,000,000 RSD Norway 2003-2006
6. Social Innovation Fund 1,425,000 EUR Norway 2003-
7. Employment Promotion The Project is implemented in pilot municipalities: Lazarevac - pilot company: REIK KOLUBARA Pancevo - pilot company: HIP PETROHEMIJA; Kraljevo - pilot companies: MAGNOHROM, Health care centre STUDENICA Niš - pilot companies: MIN HOLDING, NITEKS
5,450,000 USD World Bank DFID
2003-2006
8. Program of the support to refugees accommodated in social welfare institutions
65,640,000 CSD UNHCR 2004 –2006
9. Institutional capacity building of labour market Project is implemented in: Belgrade, Novi Sad, Sabac
900,000 EUR
Sida 2004 –2006
10. Program of the support to employment, “A step to a job” Beneficiaries: MoLESP, NES, and three pilot municipalities: Belgrade, Bor, and Pirot
7,200,000 EUR EAR CARDS 2004
Dutch and Austrian
Governments
2004-2006
11. Beautiful Serbia 2,039,942.72 USD UNDP, SCG, the City of
Belgrade and the City of
Nis
2003-2005
12. Support to the measures of human resource development
2,000,000 EUR EU, CARDS 2002-2004
13. Interreg IIIA Svilma – Development of the Adriatic Labour Market
25,000 EUR EU 2004-2006
However, unemployment remains one of the greatest economic and social problems
in Serbia. The unemployment rate, according to the Labour Force Survey, amounted
to 21.8% in 2005. Especially unfavourable is the indicator pointing to the fact that
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this rate is showing a growing tendency, considering that it was 18.5% in 2004. The
unemployment rate is relatively high, if compared with the EU member states
(average unemployment rate is 8.7%), or with some of the neighbouring countries,
such as Croatia or Bulgaria (average unemployment rates of 13.8% and 9.9%
respectively). Besides the great number of unemployed persons, the structure of the
unemployed in Serbia is also very unfavourable, taking into account great share of
long-term unemployment (79%) and large share of young people between 15-25
years of age in the total unemployment (45%), which is three times the average
unemployment of the population of this age in EU. Besides high unemployment, main
characteristics of labour market in Serbia include the latent unemployment, low share
of employment in private sector, and very low mobility of labour force. During the first
four years of transition, this problem has further increased and in the coming period it
is to be expected that the number of the unemployed will get higher, both due to the
continued restructuring of state/socially-owned enterprises and the rationalisation of
the number of employees in the public administration. It is estimated that, before
2009, in accordance with the regulations now in force, it will be necessary to resolve
the social-economic status for about 50,000 redundant people. As far as pension
system is concerned, despite significant reforms implemented in 2001 and 2003,
pension system is still characterised by the unfavourable ratio of pensioners/ insured,
average salary is still high if compared with average pension, and the inherited debts
to pensioners are still outstanding. The contributions are not adequate for pension
funding – approx. 40% of the pension fund revenue comes from the budget (annual
deficit of the pension fund amounts to approx. 6% of GDP).
For the resolution of the redundancy issue in the coming period, more funds will be
allocated for the active employment measures than it was the case in the preceding
period. Measures of the active employment policy include incentives to the
entrepreneurship, self-employment by starting up own businesses, subsidies for
employment of specific categories of the unemployed in the amount of the
contributions for mandatory social insurance paid by the employer (persons looking
for a job for the first time provided they are entered in the unemployment records for
minimum one year, persons waiting for a job for more than two years, persons over
50 years of age, unemployed single parents, or both parents unemployed,
unemployed persons who receive unemployment benefit), further education and
training, training for active search for jobs in clubs, support to business centres in
self-employment, employment in public works. It is envisaged that companies, public
enterprises, and institutions, take specific measures and activities that precede
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termination of employment, in the sense of providing resources for investment into
new jobs for dismissed employees – self-employment, increased possibilities for new
employment (organisation of further education or training, use of free corporate
resources– business premises, equipment, ensuring the market placement of goods
or services) or overcoming the period of looking for a new job through active search
for job.
Specific measures of active employment policy will be focused on new employment
of vulnerable population, young people seeking job for the first time, redundant
employees, refugees and IDPs, and members or ethnic minorities in which
unemployment rates are higher, and unemployed persons with disabilities. The
company for occupational rehabilitation and employment of persons with disabilities
are provided by the funds from the budget of the Republic of Serbia, on a monthly
basis, in the amount of up to 50% average monthly salary per an employee in the
Republic of Serbia, according to the latest published data of the Republic authority in
charge of statistical issues. Besides, the employer will be able to obtain the right to
the subsidy of salary for the period of 12 months for the person with disability without
work experience, employed with the employer under general terms of employment, in
the amount of 80% of average salary in the Republic, from the RS budget. Draft Law
on Occupational Rehabilitation and Employment of Disabled Persons (DP) envisages
the setting up (opening) of a specific (single-purpose) account for financing of the
measures for implementation of occupational rehabilitation and employment of DP; it
provides for assignment of the function “DP training centres”; companies for DP
occupational rehabilitation and employment complying with the legally prescribed
requirements and standards for provision of the occupational rehabilitation services;
also envisaged are the incentive measures for DP employment of through refunding
to the employer the investment costs allocated on the creation of possibilities for DP
employment, with the possibility of salary funding in the period of 12 months for DPs
without work experience; also envisaged is the introduction of new procedures
(forensic expertise) of assessment in the process of DP status determination for the
purposes of occupational rehabilitation, employment of DPs and their career
advancement– further education. The group for occupational rehabilitation and
employment of persons with disability, in cooperation with the Division for the
approximation of legislation to the EU acquis, international cooperation, and project
management with the Ministry of Labour, Employment and Social Policy, prepared a
number of initial project tasks which will provide for this category’s more balanced
inclusion in employment.
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Within the active employment measures, the following will be done on the labour
market31:
• Programs of occupational education and training in the period from 2006 to 2008
will involve about 10,000 persons per annum;
• Promotion of entrepreneurship, self-employment and creation of new jobs will
cover approx. 4,000 persons during a year, through the financing from budget
with special focus on financing of the self-employment programs of newly-
registered business activities; moreover, persons up to 30 years of age will be
awarded higher amounts of subsidy;
• Public works with the aim of improving and sustaining the long-term employment
of the previously unemployed persons and other persons who are deprived on
the labour market, through their engagement in special project which will cover
the target group of 4,000 persons in each of the coming three years; moreover,
the project will be implemented at local level, which will contribute to the welfare
of the community in the sense of environmental preservation and improvement
and social and economic structure enhancement;
• Programs for the improvement of employment opportunities for vulnerable
populations, covering approx. 3,000 individuals in the period 2006 to 2008;
• Projects of financing from the sources of foreign foundations and donations.
Measures of the active employment policy with be implemented through the
organisation of the occupational orientation fairs, employment fairs for specifically
targeted invitees and employers, clubs for job search, training for active job search
for easier employable persons, training for active job search by the persons waiting
for a job for more than three years, further education and training for the persons who
did not finish primary school (specific ethnic minorities – the Roma), gaining
additional qualifications, gaining different qualifications, occupational training of
trainees, occupational training of volunteer interns, occupation training of volunteer
interns, occupational training of the talents at the post-graduate studies, foreign
language courses, basic IT training, specialist IT training, training for acquiring the
proficiency for performance of tasks, setting up of virtual companies, awarding
subsidies for self-employment, one-off payments for self-employment, and
subsidising new jobs.
31 Envisaged in the latest Memorandum on Budget, Economic and Fiscal Policy
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Main directions of NES changes concern: increase of the NES share in the labour
and services market, which means the establishment of daily contacts with
employers with the aim of learning about the needs for new workers and services,
periodical surveys of employers with the purpose of balancing supply and demand,
organisation of dialogues and workshops with a smaller number of selected
employers with the aim of analysing a problem or adjusting the services to the needs
of a specific group of employers, and establishment of regional and municipality
network of contacts with the employers with the aim of re-employing the redundant
employees. In cooperation with private agencies and social partners, NES will retain
the dominant role of planning and managing the programs for which the capacity is
lacking, while private agencies will appear in the role of the NES subcontractor for
implementation of specific activities (training and employment of redundant
employees with more than 50 years of age, persons with specific needs, etc).
Cooperation will be established with social partners at local level in the institutions
that provide services related to adult education. Development of the self-service
system will be ensured through the internet system, development of the self-service
terminals in branch offices, and development of call centres, and development of
public relations. Passive measures will be separated into a special fund for
unemployment and health care within the Republic Health Insurance Office will be
relocated; this will lead to the decrease of the number of unemployed persons.
Of special importance is the development of the labour market information system,
the prerequisite for which is the adoption of new Law on Records concerning Labour
and Employment, which will provide for regular and continual monitoring of the
situation related to these issues. In addition, it is necessary to ensure further
adjustment of the information structure in the NES records system to the WAPES
standards, development and implementation of ILO and EUROSTAT standards,
adoption of the law on statistical surveys, innovation of national classification of
professions, preparation of the national standard of qualifications in adult education,
development of career guide for adults and self-assessment instruments, setting up
the centre for guidance and counselling in NES, projection of labour market,
preparation of competency profiles of the unemployed, and creation of the offer base
per individual professions, development of the accreditation and certification system
in adult education, development of the profile of employment advisor, decreasing the
number of participants included in the activities of information and counselling with
regard to the selection of educational profile at the level of secondary school
education.
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The effect of labour legislation on business operations of companies and promotion
of employment in Serbia became more favourable with new legal solutions. However,
there is still room for further improvement of labour legislation.
Contribution to higher employment will also be ensured by the amendments to the
Labour Law which will provide for the introduction of new flexible forms of labour by
the institutionalisation of the organisations (agencies) for temporary employment.
Organisations (agencies) for temporary employment will be a specific type of
employer which will establish employment with employees and then second them to
work for other employer (user of services). These organisations (agencies) will have
all the obligations towards the employees as other employers; however, the work will
not be done in the organisation (agency) as such but rather with the user of services.
By creating legal grounds for functioning of these organisations (agencies), the
practical needs for this aspect of engagement of employees will be met (provision of
security services, child minding, hygiene, etc). Regulation of status of the
organisations (agencies) for temporary employment and employee’s rights will also
provide for the application of the international standards determined by the ILO
Convention no. 181 concerning private employment agencies and the ILO
Recommendation no. 188 concerning private employment agencies, which regulate
these issues.
Also, amendments to the Labour Law are necessary because the problems that
arose in the implementation of this Law need to be eliminated, such as determination
of the compensation of salary during absence from work, level of severance pay,
right to compensation of costs for food at work and holiday bonus, salary increase on
the basis of years of service, etc.
Similar measures are supported by the Poverty Reduction Strategy Paper. With
regard to the implementation of this Strategy, the priorities in the coming period will
be: creation of flexible and competitive labour market; creation of efficient programs
for employment of the employees who were rendered redundant due to privatisation
and restructuring of public enterprises, with the focus on active measures; creation of
programs for employment of particularly affected and vulnerable populations; setting
up regional and local councils (coalitions) for employment, oriented towards
searching for efficacious local strategy of development and employment based on
the potential and risk analysis, especially in the least developed areas; continuation
of the National Employment Service reform.
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In order to diminish regional differences in the labour market, the Strategy of
Regional Development in Serbia will be adopted and the goal will be to increase
competitiveness of the economy and strengthen innovative capacity in all regions,
primarily those less developed. With the purpose of mitigating structural imbalance in
regional labour markets, active labour market measures adjusted to the needs and
specific characteristics of individual regions will be implemented. On the basis of
determined risk levels, funds will be allocated for active employment programs in
each individual region, strengthening of partnership between the state, local
authorities, private and public sector and social partners. Also continued will be the
approval of loans under favourable terms to employers intending to invest in
devastated areas with the aim of increasing employment in these areas, through the
Development Fund.
There are attempts to achieve less employment in illegal sector and decrease of the
amount of unregistered work by intensifying the labour inspection activities, by
increasing the number of supervisions and ensuring better technical equipment of
labour inspectors, which will result in greater mobility and effectiveness of their on-
site operations. It is also necessary to continue education of labour inspectors with
regard to the principles of new labour inspection policy that was adopted through the
ILO project: ''Development of labour inspection for the XXI century". Priority goals
with regard to labour inspection are to decrease the number of injuries at work,
reduce or eliminate unregistered work, and to reach the European standards in the
operations of labour inspection. To this effect, it is necessary to adopt the law on
labour inspection and code of conduct for labour inspectors.
Concerning the occupational health and safety, the activities will be focused on the
preparation of the law on insurance against work- related, occupational diseases,
and work related diseases, with appropriate by-laws. Also to be prepared is the
methodology for the examination of the conditions of working environment and
review and examination of work equipment, organisation of the education of
employees, employers and labour inspection, along with the organisation of injury at
work data collection and analysis, occupational diseases and work related disorders,
as well as the development and advancement of information-documentation activities
related to safety and health of employees.
By improving the efficiency of social welfare mechanisms, implementing the Poverty
Reduction Strategy, the Social Welfare Development Strategy, and revitalisation of
economic activity, it is expected that before 2008 more funds will be allocated for
social welfare which, in the long-term perspective, should decrease in respect of
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GDP. It is necessary to ensure that social welfare reform develops towards the
targeting of social transfers, in the sense of expanding the assistance through larger
amounts of transfers and through the social welfare network which would include
most vulnerable populations who at this time do not meet the social welfare, and
ensuring the access to all those who meet the criteria but at this time do not obtain
social protection, such as the Roma, refugees and IDPs from Kosovo. It is necessary
to create links between different sectors at the central and local level (employment,
education, health, social welfare) so as to ensure integrated access to social welfare
with emphasis on active social policy measures. An important element of long-term
strategy is the reform of social services which should adopt a trend towards
deinstitutionalisation, development of alternative forms of social welfare, and
inclusion of different actors in the sphere of provision of services. For such programs,
pilot projects are already in place through the program of the Social Innovation Fund
and the Fund for Financing of Disability Organisations. The citizens will meet their
needs primarily at the local level, in the community in which they live, with the choice
of services which are least restrictive for them, with the exception of those which are
considered to be more cost-effectively organised at a regional level. With regard to
the above, the conditions and mechanisms will be ensured for taking the
responsibility by local self-government for meeting the social welfare needs of
citizens. Funds for services financing will be provided from the local self government
original sources, and from the Republic budget in the case of municipalities which are
not able to provide the prescribed minimum of social welfare rights from their original
revenue. In view of the Poverty Reduction Strategy, besides the decentralisation of
the social welfare system, particularly significant are the provision of more efficient
material services and better quality support services, as well as strengthening of
professional capacity of those employed in social services. In order to attain better
quality of life for social welfare beneficiaries, it is necessary to ensure improved offer
of services, as per different types and quality in all forms of accommodations,
creation of the environment necessary for meeting the beneficiaries’ needs in an
appropriate manner, which includes shorter sojourn of children and young people in
the institutions, and training for independent life, more rational use of the funds for
development of social welfare services.
Reform of the pension system should be two-fold – the first group of measures is
based on the continuation of the reforms of mandatory insurance, and other –
development of private pension insurance. Reform of mandatory insurance includes:
consolidation of pension funds, such as improvement of information system and
125
reorganisation of personal records of the insured (data collection, registration of the
insured, and data management); further improvement in the control over
disbursement of contributions and disincentives for contribution payment evasion. It
is stated in the Memorandum on Budget that legal amendments will regulate
administrative and financial consolidation of the three pension funds – that of the
employees, self-employed, and farmers, with the aim of reducing the deficit in
pension funds (Administratively consolidated fund will commence its operations on
the 1st of January 2008, and financial consolidation of funds will be concluded before
beginning of 2011). Also established will be the central register of the insured and
obligors of pension contributions and income tax before end of 2010, which, through
reformation of the administration and upgrading of the information system, will enable
more efficient control and collection of contributions as well as strengthening of the
capacity through better links of the tax administration and pension funds. To ensure
serious and thorough consideration of the introduction of mandatory private pension
insurance (second pillar), it is necessary, in the coming period, to achieve fiscal
balance and improve financial standing of the state pension system (first pillar).
Namely, due to high transition costs which are created by the introduction of second
pillar, and due to specific negative aspects observed in the pension systems of
neighbouring countries which have included this type of insurance in their respective
system, introduction of second pillar in the Serbian of pension system is not
contemplated in the coming period. At the same time with the reform of the state
pension system, after the introduction of voluntary pension funds (third pillar), their
operations will be improved in the coming period of three years and this will
significantly influence the stability of the overall pension system and its long-term
sustainability. To ensure this, the citizens’ awareness will be raised with regard to the
goals and importance of pension reform and introduction of voluntary pension
insurance, so as to provide greater social support for the reforms. Introduction of
voluntary private pension funds will provide greater income in old age and, at the
same time, contribute to the development of capital market.
With regard to the salary policy, maintenance of firm salary policy in public sector will
be continued and their growth will be in line with productivity. Salaries in public
services will be regulated by separate regulations which will establish an incentive
salary system with the goal of increasing the quality of public services.
Improvement of the work efficiency of social-economic councils at all levels and
establishment of different aspects of cooperation between the social partners on
126
resolution of the unemployment problems, improvement of living standard, and other
issues of common interest.
In the summary of the above described labour, employment, and social policy related
reform trends, it may be stated that, in the coming middle-term period, the line
ministry will be faced with the following key challenges:
• strengthening of the active employment measures, which include encouragement
of entrepreneurship, self-employment through starting own business, subsidies
for employment of specific categories of the unemployed in the amount of
contributions for mandatory social insurance paid by the employer, and through
the increase of employment rate on the basis of faster development of small and
medium enterprises;
• increase of employment of vulnerable populations, namely ethnic minorities (the
disabled, the Roma, refugees and IDPs, long-term unemployed, unqualified)
through implementation of specific programs intended for those populations;
• further improvement of labour relations and social dialogue;
• strengthening of labour market institutions, and development of the information
system;
• strengthening of the labour inspection system, with the aim of general
suppression of unregistered work, particularly in the service sector but also in the
sector of social services and health care;
• improvement of the occupation safety and health system;
• reform of pension system (in cooperation with the Ministry of Finance);
• reform of the social welfare system.
With the aim of contributing to the implementation of above listed requirements, the
line ministry proposes the implementation of a set of programs and projects (Table
18). These projects are focused on the improvement of the line Ministry capacity in
respect of more active intersectoral and international cooperation, planning and
monitoring of donations and labour and employment related projects, as well as
approximation of labour, employment and social policy related regulations with the
EU acquis. Also, the projects are partly focused on the continuation of the NES
reform, particularly with the aim of implementing the approach that is fully oriented
towards the users and include cooperation with employers, efficacious search for a
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job using the unique information system, and establishment of the monitoring and
evaluation system. Other projects are devoted to the reform of social welfare and
reform of the pension system.
Table 18. Priority projects related to labour, employment and social policy in the period 2007-2009:
Data on sources of funding Project name Institution in
charge Estimated
project value (EUR) Own funds
External sources of
funding
Planned commencement
of project implementation
1. Implementation of the National Employment Action Plan 2006-2008, with special emphasis on vulnerable population (women, persons over 45/50, disabled, refugees and IDPs, minorities)
MoLESP NES
150,000,000 100,000,000 50,000,000 2007- 2009
2. Project „With severance pay to a new job” with emphasis on self-employment, training and employment with other employer
MoLESP 18,800,000 10,000,000 8,800,000 2006- 2009
3. Support to setting up and adaptation of local social protection services
MoLESP, Province Secretariat, Local self-government
37,265,000 Budget-NIP**
Donations 2006- 2008
4. Country Assistance Strategy (CAS)
decentralisation of services and benefits – support to pilot projects
(multisectoral approach)
MoLESP, MoH, MPS and Standing Conference of Towns and Municipalities as a partner
22,000,000 World Bank 2007- 2009
5. Project of the reform of pension administration system and integrated collection in Serbia
MoLESP, MFIN
21,000,000 200,000 20,800,000 World Bank
2006
6. Implementation of the Strategy for Social Welfare Development
MoLESP, Local self-government
14,600,000
1,600,000 13,000,000 2006 -2009
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7. Setting up and rehabilitation of the institutions for accommodation of the elderly
MoLESP, Province secretariat, Local self-government
12,600,000 Budget-NIP Donations 2006- 2008
8. Capacity building in MoLESP
MoLESP, NЕS 10,000,000 1,000,000 9,000,000CARDS 2006
2006- 2008
9. Action plan for employment of young people, in the period 2007-2009
MoLESP, Local self-government
10,000,000 7,000,000 3,000,000
2007- 2009
10. Setting up and rehabilitation of the institutions for accommodation of children and adolescents
MoLESP, Province secretariat, Local self-government
1,326,000 Budget-NIP Donations 2006- 2008
11. Setting up and rehabilitation of the institutions for accommodation of mentally disabled persons
MoLESP, Province secretariat, Local self-government
4,923,000 Budget-NIP Donations 2006- 2008
12. Adaptation and equipment for social labour centres
MoLESP, Provincial Secretariat, Local self-government
174,000 Budget-NIP Donations 2006- 2008
13. Development of information systems (equipment and programs) for the requirements of the Ministry for Labour, Employment and Social Policy
MoLESP 2,500,000 Budget-NIP Donations 2006- 2008
14. Setting up a database about the persons with disability in the Republic of Serbia
MoLESP 2,500,000 Budget-NIP Donations 2006 – 2008
15. Plan of investments in the Labour Inspection Division
MoLESP 2,500,000 Budget-NIP Donations 2006- 2007
16. National centres for children protection and prevention from abuse and neglect
MoLESP 800,000 Budget-NIP Donations 2006- 2009
17. „Safe house“ shelter for abused mothers with older children
MoLESP 2,000,000 Budget-NIP Donations 2006- 2007
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18. Building of the information system in employment
NES 4,000,000
1,500,000 EUR –
subsystems of installation
and training 2,500,000 EUR
Planned through
the CARDS
Project 2004 and 2006
2006- 2008
19. Development of the strategy for increasing productivity and competitiveness of Serbian economy
MoLESP, MPRIV, MFIN
500,000 Budget UNIDO 2006
20. Raising competitiveness of companies for occupational training and employment of persons with disability in the market of Serbia
MoLESP 2,400,000 1,000,000 700,000 Kingdom of
Norway
2006- 2007
21. Preparation of national action plan for the persons with disability in RS
MoLESP and local self-governments
Budget Donations 2007- 2009
22. Setting up of small home communities for mentally challenged persons
MoLESP 2,000,000 Donations 2007- 2009
23. Social Innovation Fund
MoLESP, Local self-government
5,850,000 650,000 DFID, Norway 2006- 2008
24.Establishment and application of the system of accreditation in programs for training of social service workers in RS
MoLESP 500,000 2006- 2007
25. Expert support through education and support to regional cooperation in the field of social security
MoLESP, Local self-government
2,200,000 CARDS 2005 -2007
26. Shelter for victims of people trafficking
MoLESP, Counselling centre against domestic violence
300,000 25,000 25,000 25,000
225,000 Austrian
Development Agency
2007 2008 2009
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27. Development and strengthening of employment agencies
MoLESP
50,000 50,0002007- 2008
28. Preparation of the strategy related to external migrations
MoLESP Ministry for diaspora, Ministry of Foreign Affairs
200,000 200,000 2009
29.Innovation of national system of classification of jobs according to the EU standards – ISCO 88
MoLESP, NES MSP
1,000,000 100,000 900,000 2008
30. Preparation of the study on results of privatisation from the perspective of future investments and creation of new jobs
MoLESP 300,000 300,000 2007
31. Development of centres for career guidance and counselling of the unemployed
MoLESP NES
1,400,000 400,000 1,000,000 2006- 2008
32. Studies on regional development from the perspective of raising the employment levels
MoLESP 400,000 100,000 300,000 2006- 2008
33. Setting up and strengthening of local employment councils
MoLESP, Local self-government
* Donations
34. National strategy against violence
MoLESP * Budget 2007
35.Implementation of General Protocol on protection of children from abuse and neglect
MoLESP and UNICEF
* UNICEF 2006
36. Implementation of the Specific Protocol on protection of children from abuse and neglect in social welfare institutions
MoLESP
*
MoLESP and „Save the Children“
2006
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37. Support to motherhood –effects of the implementation of the Law on Financial Support to Families with Children on population policy
MoLESP and World Bank
* World Bank 2007
38.Implementation of the Law on Employment on Persons with Disability
MoLESP
33,730,667,00 Donations 2007
39. Strategy of the Pension System Development in Serbia
MoLESP 355,000 USD Budget World Bank credit
/Donations
2007
40. Preparation of studies on prospects for the development of pension and disability insurance of farmers
MoLESP, MFIN, Tax Administration, Republic Fund for Pension Insurance of Farmers
80,000 EUR Donations 2007
41. Preparation of the feasibility study for the introduction of social (national) pensions
MoLESP 80,000 EUR Donations 2007
42.Preparation and implementation of the Strategy for reform of salaries in public services
MoLESP * Budget DFID 2006- 2007
42. a. Improvement of social dialogue - strengthening of the institution of settlement labour disputes, collective negotiation and social-economic councils at all levels
MoLESP Budget 2007-2009
43.Institucionalisation of the organisations for temporary employment
MoLESP * Budget 2007
44.Introduction of coupon systems for meals at work
MoLESP * Budget 2007
45.Establishemt of uniform system of records related to labour and employment
MoLESP * Budget 2007- 2009
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46. Development of human and information capacity for the introduction of the system of quotas, work permits, and certification of registration of work done by foreign citizens
MoLESP * Budget 2007.
Source: Ministry of Labour, Employment and Social Policy * It is necessary to assess the project value, as well as structure of funding sources in cooperation with the competent ministry and competent institutions ** For the projects envisaged to be funded from NIP it is not possible to estimate the amount of funds at this time, because sectoral plan for this sector is not in place yet.
3.5. Agriculture, forestry and water management
Agriculture is an exceptionally important component of the overall economy of the
Republic of Serbia. The share of agriculture in Serbian GDP in the period 2000-2005
ranges between 15% and 20%, but if the whole agribusiness complex of the country
is taken into account, the share exceeds 40% of the total GDP. However, considering
that 42% of the country’s population lives in rural areas, Serbia is considered to have
great potential in the agricultural sector which is not fully utilized.
The problems in agriculture primarily relate to: high tariff protection of domestic
production; inadequate operation of land market; underdeveloped market for rural
loans; slow privatisation with few foreign investments; unequal development of rural
and urban areas; underdeveloped market infrastructure, institutions and
organisations. However, with adequate agricultural policy which may influence the
increase of productivity through restructuring and investment, agriculture may give a
significant contribution to the country’s economic development. In the following
period, gross added value is expected to rise in agricultural activities, which include
hunting, forestry and fisheries, considering that Serbian agriculture will be able to use
the EU pre-accession assistance funds (IPA, former SAPARD - fund intended for
agriculture and rural development).
In November 2004, the Government adopted the Agricultural Strategy of Serbia to be
implemented in the following period until 2008/2009. The Serbian agricultural policy goals were officially adopted and new directions to follow to achieve such goals were
developed. The main development directions of agricultural development are:
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• Restructuring (of producers, ownership and institutions) - involves: land reform,
institutions in agriculture, privatisation in agriculture and management of forest and
water resources;
• Development of the market and market mechanisms - involves: the role of the
Government in market economy, agricultural markets, price policy and other
measures of agricultural policy for market support, land and loan market;
• Rural development and environmental protection - involves: rural development,
production diversification and improvement of the living conditions of rural
population.
All the activities proposed in the Strategy are fully in compliance with EU standards.
The institutional framework was for the most part created in 2004 and 2005 when
there were formed institutions for the implementation of the agricultural strategy:
Veterinary Directorate, Plant Protection Directorate, Republic Water Directorate,
Directorate of Forests, Inspection Division, Analysis and Agricultural Policy Division,
Agricultural Policy Division, Legal and General Affairs Division, Rural and Agricultural
Development Division.
The legal framework is still based on the pre-transition legislation. The new laws
enacted were the Veterinary Law in 2005 and the Law on Agricultural Land and Law
on Organic Farming an Organic Products in 2006. The Law on Agriculture, the Law
on the Protection of Plant Varieties, and Law on Plant Health are in parliamentary
procedure, and a large number of laws are at the drafting stage. The enacting of
such laws will mean the harmonisation of the legislation and standards with the
European ones, to facilitate the export of our products to the EU market. This will
considerably contribute to the introduction of food safety standards, primarily
HACCP, which ensure full safety of food products in all the segments of production
and processing, on the “field to fork” principle.
Aiming at the reform and development of agriculture, the Ministry of Agriculture of
Serbia earmarked in the agricultural budget incentive funds for farmers for the
improvement of agricultural production and marketing, as well as for investments in
rural infrastructure. The funds are mostly granted for the projects of building storage
facilities for agricultural products and farm refurbishment, as well as for investments
into construction and equipment of rural development centres. Incentive funds are in
the form of grants from 30 to 60 percent of the investment value. These projects will
also be funded through the National Investment Plan.
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In the previous five years, international assistance to the agricultural sector was
mostly technical and intended for the strengthening of institutional capacity of the
sector and preparation of programs and plans of future development, while a part of
international funds was invested in the reconstruction of laboratories and irrigation
and drainage systems. In the following period the support should be directed towards
the strengthening of funds directed towards structural reforms, capital investments
and establishing standards for the production and processing of agricultural produce
and foodstuffs.
Major projects in the area of agriculture, forestry and water management 2000- 2005-(6):
1. Technical advisory project - Policy advisory unit EAR 2001-2003
2. Reform of laboratories for food safety inspection EAR 2002-2004
3.Registration of cattle compatible with the EU system EAR 2003-2006
4. Support to the establishment of the agricultural market information system USDA 2004
5. Report on Consumer goods analyse USDA 2004
6. Institutional capacity building within MAFWM EAR 2004-2005
7. Reform of the veterinary, phyto-sanitary and sanitary inspection EAR 2004-2007
8, Building of institutional capacities in the Plant Protection Directorate of MAFWM EAR 2006-2008
9. Rural development programming and payment system EAR 2006-2008
10. Serbian transitional agricultural reform (STAR) World Bank
10a. Preparatory phase for STAR: In situ agro-biodiversity conservation project GEF-PDFB 2006
10b. Preparatory phase for STAR: Rural business environment project PHRD 2006
11. Development of forestry sector in Serbia FAO/Finland 2005-2008
12. South East Europe Development Network on Plant Genetic Resources Sweden 2004- 2014
13. Forestry Sector Program Austria January 2004-Decembar 2004
14. Support to restructuring of JP „Srbijašume” Norway 2004-2006
15. Danube pollution reduction World Bank 2006-2010
16. Irrigation and drainage rehabilitation World Bank 2006-2011
17. Institutional capacity building within the veterinary directorate of MAFWM EAR 2006-2008
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18. Institutional capacity building for the regulation of the wine sector in the Republic of Serbia EAR 2006-2008
Priority activities in agriculture in the following three years will include: preparation of
the national agricultural program for the period 2007 - 2010; adoption of strategic
documents which will ensure the implementation of the main reform goals in
agriculture, forestry, hunting and water management; establishment of databases for
monitoring and reform of the subsidy system, as well as carrying out of activities
aimed at integration into the EU Common Agricultural Policy (with emphasis on the
development of food and animal feed safety policy to be compatible with the EU food
safety system, as well as with the basic principles of WTO and relevant treaties for
the purposes of protection of human, animal and plant health).
The National Agricultural Program will elaborate measures and activities for the
achievement of basic reform goals in this area, as well as the purposes and use of
budget funds in the period between 2007 and 2010. The first group will include
market measures related to export subsidies, price support, direct payments per
hectare or head of cattle, input price subsidies (part of costs to be borne by the
Government) and subsidies for the storage of commodities. The second group will
include all structural measures, such as support to investment, rural development,
standards introduction, land improvement, environmental protection and conservation
of biodiversity.
Opening of the Republic of Serbia economy towards the international market and
foreign trade liberalisation will result in gradual reduction of tariff protection
measures. After the expiration of the transition period, the Republic of Serbia will be
able to retain a part of tariff and non-tariff protection in the trade in agricultural
products with the EU. The quotas for particular products awarded to the Republic of
Serbia by the EU will not be reduced.
Within the WTO accession negotiations, it is necessary to prepare the programs for
the harmonisation of all regulations with the WTO rules and program of policy
measures in agriculture, services, intellectual property, standardisation, technical
regulations, food safety and veterinary and phytosanitary measures.
To increase competitiveness and build a sustainable and efficient agricultural sector,
institutional building will continue in agriculture to facilitate the adjustment to market
business and conditions that prevail in the EU, and will include the improvement of
advisory services, research in agriculture and agricultural market information system
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(STIPS). The new Law on Agricultural Land establishes the Agricultural Land
Directorate whose activities will be related to the completion of the agricultural land
reform and transfer of socially-owned land to state or private ownership and
management of state-owned land, as well as the regulation of inspection supervision.
Through the building of the credit market a system will be established of short-term
borrowing for production and sales, a system of mid-term borrowing for the
procurement of fixed assets and a system of long-term borrowing for the purchase of
land. In the credit market system, by the enactment of law on public warehouses, a
legal and institutional basis will be created for the use of short term loans on the
basis of commodity bills.
Rural development will request considerable investments in future, namely,
improvement of living and working conditions in rural areas and promotion thereof as
healthy and attractive living environments. Rural development programs will
encourage production and marketing improvement, strengthening of rural
infrastructure and diversification of rural economy, development and promotion of
rural areas, protection of the environment and rural landscapes.
The Poverty Reduction Strategy Paper places emphasis on the encouragement of
employment and economic growth and raising of the standard of living in rural areas
through the setting up of the Rural Development Agency with the capacity for
identification, planning, approval and implementation of rural development initiatives,
as well as financial management and control.
The basic elements of the forestry policy will be based on the forestry development
strategy, which is being drafted and will relate to the conservation and improvement
of the state of forests, and forestry as a branch of economy. The implementation of
the established policy in the area of forestry will involve institutional and legislative
reform in this area, education of relevant professionals for this sector. Institutional
framework building involves the passing of the new law on forests and
implementation of the Forest Policy and National Forest Program, as well as
adoption of new implementing legislation of importance in this area.
The water management sector, as a very important part of the economic and social
system is also characterised with numerous problems, the solution for which requires
large investments that cannot be provided by the government itself. Key problems in
the water sector are: insufficient harmonisation between the policy of the water sector
with other sectors (primarily environmental protection), regulation mechanisms
incompatible with European trends and standards, inefficient water management
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funding system, low price of water and services and lack of economic incentives,
insufficient and inadequate monitoring of surface and ground waters and lack of
control of waste waters, wasteful use of water for water supply and other needs,
insufficient sewerage in settlements and lack of waste water treatment equipment,
insufficient use of the existing irrigation capacities, inadequate system of protection
from external and internal waters. Due to the above, the period 2007-2009 should
involve the activities on the creation of the legal and institutional framework
necessary for the implementation of reforms in the water sector and the beginning of
the investment cycle. The priorities in water management in the following three years
are water supply to rural population, completion of large water supply systems,
protection of waters in existing reservoirs used for water supply, construction of
waste water treatment plants by the users who discharge water into small water
courses, as well as the enactment and implementation of relevant regulations.
In accordance with the above development guidelines for the sector of agriculture,
mid-term priorities for the agriculture, forestry and water management are:
• additional strengthening of administrative capacity for policy development and
implementation; rural development policy creation and beginning of
implementation,
• continuing the strengthening of veterinary, sanitary, phytosanitary legislation and
control in the area of food safety and wine inspection laboratory,
• improvement of waste management and pollution reduction in agriculture,
• strengthening the market systems for agricultural produce and foodstuffs,
including quality control and hazard analysis and critical control points (HACCP),
• reducing agricultural market disruptions caused by policy changes and reforming
the Commodity Reserve Directorate,
• extending the identification and registration of animals to include more species,
• strengthening the land market operation, commencement of land reform,
restructuring and privatisation of large farms,
• creating conditions to meet the farmers’ needs for short-, medium- and long-term
borrowing,
• continuing the harmonisation of reforms with the WTO rules and obligations to
speed up the WTO accession,
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• creating modern and efficient institutions which develop, implement and supervise
effective policies and successfully negotiate with the EU and other trade partners.
• establishing an authority to manage water resources which can be self-funded and
which will meet user needs,
• modern and efficient Ministry of Agriculture, Forestry and Water Management,
Republic Water Directorate implementing and overseeing efficient policy in the
water sector and successfully negotiates with the EU,
• Building institutions which can implement water management policy with quality
and efficiency,
• Provide the population with drinking water of controlled quality in rural and urban
areas,
• Build systems for collecting, transport and treatment of waste waters in
settlements, especially in endangered zones,
• Provide efficient flood defence through the rehabilitation of the existing and the
construction of missing facilities for the protection from the harmful effects of
water,
• Creating efficient and effective institutions for the acquisition and transfer of water
management knowledge,
• Improvement of the state of resources and development of the forestry sector.
Ministry of Agriculture, Forestry and Water Management defined specific projects to
be implemented in this area in the following three years (Tables 19a and 19b).
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Table 19a. Priority investment projects in agriculture, forestry and water management in the period 2007- 2009
Data about sources of funding
Project name Institution in charge
Estimated project value (EUR)
Own funds
External funding sources
Planned time of project
implementation
1. Development of the integrated National Rural Development Program (NRDP) and implementation framework at the national, regional and local level in the Republic of Serbia
MAFWM 6,000,000 2-3 years
2. Water management information system
MAFWM 2,000,000 2 years
3. Information system for Morava catchment area
MAFWM 4,000,000 3 years
4. Mapping of blue zones, phase 1
MAFWM – Water
Directorate
3,000,000 3 years
5. Funding of construction of water management facilities for water supply and collection, transport and treatment of waste waters
MAFWM – Water
Directorate
20,000,000 2 – 3 years
6. Funding of construction of water management facilities for the protection from harmful effects of waters
MAFWM – Water
Directorate
10,000,000 2 – 3 years
7. Building of the „Svračkovo” dam within RVS „Rzav”
MAFWM – Water
Directorate
80,000,000 5 years
8. Measures of village improvement and rural development
MAFWM 30,600,000 30,600,000 (NIP)
2 years
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9. Construction of water management facilities and implementation of the water protection programs and programs for the protection from harmful effects of waters
MAFWM 29,300,000 29,300,000 (NIP)
2 years
10. Forestation and construction of the centre for the production of planting material
MAFWM 2,800,000 2,800,000 (NIP)
2 years
Table 19b. Priority reform projects of MAFWM in the period 2007-2009
Data about sources of funding
Project name Institution in charge
Estimated project value (EUR)
Own funds
External funding sources
Planned time of project
implementation
1. Policy management through MAFWM
MAFWM 2,000,000 2-3 years
2. MAFWM capacity building for the development of trade policy for agricultural products and foodstuffs
MAFWM 2,000,000 2 years
3. Development of EU compatible system for agricultural market and farm business information
MAFWM 2,000,000 2-3 years
4. Strengthening and further development of the epidemiological supervision system and animal traceability system in the Republic of Serbia,
MAFWM 1,680,000 2-3 years
5. Capacity building of MAFWM – Directorate of Forests
MAFWM 200,000 2 years
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6. Harmonisation of national legislation with EU acquis in the area of food of animal origin and implementation of new statutory provisions
MAFWM 2,000,000 2 years
7. MAFWM capacity building – land management
MAFWM 2,000,000 2 years
8. Capacity building of JVP „Srbijavode” and JVP „Vode Vojvodina” for the implementation of integrated management of water resources with the use of simulation
MAFWM 1,300,000 3 years
9. Capacity building for the staff of MAFWM – Republic Water Directorate, for certain competences
MAFWM – Water
Directorate
2,000,000 2 – 3 years
10. Development of the centre for integrated catchment area water management
MAFWM – Water
Directorate
5,000,000 3 years
11. Establishment of the system of rights to grow vineyard plantations and technical assistance
MAFWM 3,000,000 3 years
12. Zoning, and strengthening of the issues of control of geographical origin of wine including technical assistance
MAFWM 3,000,000 3 years
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13. Technical equipment of wine laboratories for the quality control of wine and control of geographical origin
MAFWM 4,000,000 3 years
14. Technical equipment of laboratories for phytosanitary control (of seeds, planting material...)
MAFWM 4,000,000 3 years
15. Strengthening of staff capacities in the area of production, certification and control of planting material
MAFWM 3,000,000 3 years
The proposed projects are mainly directed towards the realization of two priorities: a)
creation of modern and efficient institutional capacities for the development and
implementation of adequate development policy, and b) human health protection
from the diseases originating from food, animals, harmful pesticide effects, and
veterinary medication and food additives.
To achieve other priority goals of agriculture, forestry and water management
development, it is necessary to define specific projects primarily from the area of:
• rural development (development and adoption of basic principles of rural
development policy, categorisation according to the EU model on less favourable
areas for production, preparing a Program for the development of ecological
agricultural systems, especially for marginal and areas of protected nature, adopt
regional and local rural development action plans, preparing of rural development
programs for the implementation of the Agricultural budget funds and
grant/donation funds);
• development of the structure of commercial farms which will suit the needs of a
modern market economy (encouraging the process of increasing the number of
commercial family farms, consider all possibilities leading to the augmentation of
farm holdings, support to the entrance of young and early retirement of elderly
farmers, considering the Probate (Inheritance) Law, establish the Land Agency,
define different measures of agricultural and social policy for commercial and non-
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commercial farm holdings, complete the transition of agricultural and food-
processing companies from state to private ownership);
• development of an efficient and affective land market (complete the land cadastre
and facilitate agricultural land registration, establish the Agency for Agricultural and
Forest Land which would be in charge of managing all agricultural and forest land
owned by the state or for which ownership has not been proven, constant
improvement of land quality);
• development and infrastructural projects in water supply and channelling;
• improved organisation of farmers at all levels (enactment of the Law on Agricultural
Cooperatives, establishing a Cooperative Support Centre, passing a Law which will
solve the issue of ownership and restructuring of cooperatives under dispute,
solving the problems of ownership over cooperative property, the Chamber of
Agriculture run by the users and designed to suit their needs);
• environmental protection from waste water, pesticides and veterinary medicines.
3.6. Mining and energy
The current situation in the energy sector is characterised by: non-economic price of
electricity; unsatisfactory state of energy generating facilities as a consequence of
insufficient investment in the previous period into overhauls and investment
maintenance, as well as non-harmonised development of the energy sector, in terms
of rational use of energy sources; increase of energy efficiency both in generation
and distribution, as well as with end users where energy services are rendered; need
for revitalisation of the existing energy facilities and investment into generation,
transmission and distribution capacities; setting of the strategic and legal
development framework; beginning of the process of the regional electricity and gas
market creation, through the Athens Process and signing of the Treaty Establishing
the Energy Community of South-East Europe; beginning of the restructuring of public
enterprises; commencement of the setting up of deregulated market and market
institutions, etc.
The liberalisation of electricity market in the Republic of Serbia is one of the
necessary and key factors for boosting and acceleration of economic development.
One of the most important tasks that power sector and the government are facing is
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the process of harmonisation and association with the EU. Moreover, The Republic
of Serbia, first as a signatory of the so-called Athens Memoranda of Understanding
(2002 and 2003), and then the Treaty Establishing the Energy Community of South
East Europe (2005), has been from the very beginning involved in the creation of the
regional electricity and natural gas market at the SEE level, as well as its integration
in the internal market of the European Community.
The basic goal of the energy system reform is rational use of energy sources as
well as increased energy efficiency in generation, transmission, distribution and
consumption of energy, setting qualitatively new operating conditions and
development of generating energy sectors and energy consumption sectors which
will have a stimulating effect on the economic development of the Republic of Serbia,
environmental protection and integration of the domestic energy sector into the
regional and European energy market.
The key document for the implementation of reforms in the energy sector is the
Energy Law defining the basic goals of the energy policy which is to be implemented
through the Energy Sector Development Strategy, Programs for the implementation
of the Strategy and energy balance sheet. The basic development directions for the
energy sector in the Republic of Serbia are:
1) safe, good quality and reliable supply of energy to consumers, with reduced import
of energy sources,
2) transformation of the energy system and improvement of energy efficiency,
3) harmonising the energy sector development with other sectors of the economy.
The Energy Sector Development Strategy for the period until 2015, adopted by the
National Assembly in May 2004, defined the priorities and measures to achieve these
goals, and which include, inter alia, the implementation of the technological
modernization programs for the generation systems, rational use of energy sources
both in generation and consumption sectors, and investment into construction of new
power plants (with energy efficient and environmentally friendly technologies as well
as those using renewable sources). One of the necessary and key factors for the
boosting and acceleration of economic development of the Republic of Serbia is the
electricity market liberalization in the Republic of Serbia, but that is, at the same time
one of the most important tasks the energy sector and the government are faced with
in the process of EU harmonisation and accession.
145
By the enactment of the Energy Law, our energy legislation was harmonized with the
EU energy legislation. The harmonization of local regulations governing legal
relations in the energy sector with the EU acquis, and creation of the instruments
related to the regional market, was carried out with the view to provide the necessary
conditions for establishing links between the energy actors in the region, their equal
treatment on the energy market, approximately the same level of protection of
customers and other conditions provided for the gradual opening of the energy
market. The Energy Law created the institutional framework for the energy sector
and established two agencies in this area:
- Energy Agency, an independent regulatory body, responsible for the adoption of
tariff systems for electricity and natural gas for tariff customers, as well as the tariff
systems for the access to and use of the energy transmission, transport and/or
distribution system and of natural gas storage facilities; developing methodology for
defining the tariff elements for the calculation of the power and natural gas prices;
determining the criteria and costs of the connection to the energy transmission,
transportation and distribution system; issuing licenses for conducting energy
activities. It is necessary to strengthen the Energy Agency function considering that
the tariff system and methodology, together with the Rules on Market Operation, are
the basis of the substantive reform of the energy sector, relating to network energy.
- Energy Efficiency Agency (performs professional activities aimed at improvement
of conditions and measures for the rational use and savings of energy and energy
sources, as well as increasing efficiency in all sectors of consumption).
Part of the reform of the energy sector is the restructuring of public enterprises and
improvement of their efficiency. In 2003, as part of its rationalisation and restructuring
activities relating to Elektroprivreda Srbije (Power Industry of Serbia), underground
coal mines were separated from the company. In 2005, the Government formed two
completely independent companies from the previous vertically integrated company
JP EPS- Public enterprise for generation and distribution of electricity, management
of the distribution system and trade in electricity (JP EPS) and Public enterprise for
the transmission of electricity and management of the transmission system (Serbian
transmission system and market operator, JP EMS- Elektromreža Srbije), which
commenced their operations on 1 July 2005. Further activities on rationalisation and
restructuring of JP EPS are envisaged for the next phase. In 2005, the Government
formed three completely independent companies from the previous vertically
integrated company JP NIS: Public enterprise for the pipeline transport of oil and
products (JP „Transnafta”), Public enterprise for transport, storage, distribution and
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trade in natural gas (JP „Srbijagas”) and joint-stock company for exploration,
production, processing, distribution and marketing of oil and products and exploration
and production of natural gas (NIS a.d.). Belgrade Refinery and Fabrika Maziva
Krusevac, which produce lubricants, and which have already entered the privatisation
process. The Privatisation Advisor for NIS a.d. has already been engaged and
proposed the privatisation strategy approved by the Government on 20 July 2006.
The National Action Plan for the Gasification of the Republic of Serbia was approved,
providing basic technical and economic data on the planned development of gas
network in the Republic of Serbia, as well as the plan of activities on enacting gas
related legislation. The oil and gas sector actively participates in the activities
strengthening regional cooperation, establishing of a single market for natural gas in
the South East Europe, and in particular, on the implementation of the Pan-European
Oil Pipeline project .
The main goal of the mining sector is the improvement of the position of mining in the
Serbian economy and attracting investments into exploration and mining. The basic
prerequisite for the above was the enactment of the Amending Mining Law. The Law
provides legal set up for establishment of the Mining Agency which will carry out
professional activities in mining and geological exploration. With the aim of providing
funding to encourage small and medium sized mining companies, the proposal for
the establishment of the Mining Investment Fund is being drafted, in accordance with
the Strategy of Economic Development of the Republic of Serbia until 2012. The
Government began restructuring activities in large mining systems with the aim of
eventually privatising them (RTB Bor, JP PEU, Trepca lead and zinc mines,
Magnohrom, Zajaca, etc). Some of them are in the final phase of restructuring, and
some have already been privatised. The public administration switch to information
technologies required the development and improvement of GIS technology in the
area of mining and geological exploration. This process began in 2001 and the
compiling of all the available data for the entire sector.
Energy resources in the Republic of Serbia are relatively poor and their geographic
distribution is uneven – oil, gas and good quality coal are imported, while electricity
still can be produced on the basis of local resources, so the import of energy
resources will have to rise further, and this growth will be much faster if serious
government measure are not undertaken to encourage greater energy efficiency
(inefficiency of all energy transformation is high) and the use of remaining domestic
resources and renewable energy resources. In addition, with regard to environmental
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protection from adverse impacts of pollution from energy facilities, the Republic of
Serbia lags behind the developed countries and EU standards.
The energy sector has a significant share (17%) in the total volume of implemented
international assistance in the last five years. International assistance funds were
directed towards the development of the market and institutions in the energy sector,
as well as the reconstruction of infrastructure of the current energy system,
improvement of energy efficiency and environmental protection. As for the private
sector activities, investors showed great interest in the concessions for the
exploration and mining for different ores at several locations. In the following three
years, other attractive prospects will be ready for concessions, in particular in the
energy sector.
Major projects in energy sector between 2000 and 2005:
1. Energy Efficiency Project World Bank
2. ECSEE Project (Republic of Serbia) World Bank
3. EPS: energy sector loan II EBRD
4. EPS: loan for the reconstruction of energy sector EBRD
5. Assistance in the creation of electricity market in the Republic of Serbia European Union
6. Detailed supervision of projects for thermal power plant emissions in the Republic of Serbia
European Union
7. Improvement of maintenance in mining and power industry European Union
8.Legal advice for institution building with the Ministry of Mining and Energy
European Union
9. Assistance in the restructuring of the energy sector European Union
10. Placing of consultant for institutional building with the Power Industry of Serbia (EPS)
European Union
11. Establishment and operation of Energy Agency European Union
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12. Regional encouragement of energy efficiency and renewable energy sources (Serbia, Montenegro, UNMIK)
KfW
13. Reconstruction of hydro power plant in Bajina Basta KfW
14. Reconstruction of district heating systems in the Republic of Serbia KfW
15. Establishment and operation of Energy Efficiency Agency European Union
16. Assistance for energy efficiency in the Republic of Serbia (Assistance to Serbian institutions – financial aid for the operation of energy efficiency centres and network for energy efficiency in industry)
Norway
17. Feasibility study for the cogeneration (heat and electricity) plant in Belgrade
US TDA
18. Assistance in the creation of electricity and gas market in the Republic of Serbia
European Union
19. Modernisation of utility services (projects demonstrating energy efficiency, support to the Energy Efficiency Committee of the Standing Conference of Towns and Municipalities and development study for energy efficiency and other projects)
GTZ
20. Technical support for the signing and ratification of the Kyoto Protocol and interpretation of the systems for the promotion of renewable energy sources through green certificates (transferable permits)
Italy
21. Building of institutions and centre for renewable energy sources within the Energy Efficiency Agency (Assessment of wind potential as an energy source at selected locations – donation in measuring equipment, technical assistance for the collection of data, development of the study and training of local experts)
Spain
22. Promotion of investments in the projects regarding energy efficiency and renewable energy sources in the Republic of Serbia (Establishment of the DNA)
UNDP
Mid-term priorities in the energy sector in the Republic of Serbia, as defined in the
European Partnership are:
• Adoption and implementation of long term strategy for environmentally sustainable
energy policy, and
• Fulfilment of regional and international obligations in the energy sector aimed at
establishing a competitive regional energy market.
The top priority in the following period is the implementation of the Treaty
Establishing the Energy Community signed on October 25, 2005 in Athens, between
the European Community on the one side, and the SEE countries, with the Republic
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of Serbia among them, on the other side. The Treaty implies: creating a stable
regulatory and market framework for electricity and gas, capable of attracting
investment and being a prerequisite for economic and social progress; creating a
single regulatory space for trade in electricity and gas; enhancing the security of
supply; improving the environmental situation and fostering the use of renewable
energy; developing market competition in the electricity and gas market.
The Treaty came into effect on 1 July 2006, since it was ratified by the EC and the six
Contracting Parties. By the ratification of this Treaty in the National Assembly on 14
July 2006, its provisions became binding for the Republic of Serbia. The Energy
Community process, established by signing the Treaty, implies the establishment of
the SEE Regional Energy Market and the integration into the Internal Electricity and
Gas Market of the European Community.
The Energy Community Treaty provides for:
- Implementation in our legislation of EU Directive 2003/54/EC concerning the
common rules for the internal market in electricity, EU Directive 2003/55/EC
concerning common rules for the internal market in natural gas, and the Regulation
1288/2003/EC on conditions for access to the network for cross-border exchanges in
electricity.
- Implementation of Directive 2001/77/EC on the promotion of electricity produced
from renewable energy sources in the internal electricity market and Directive
2003/30/EC on the promotion of the use of bio-fuels or other renewable fuels for
transport.
- Analysis of our present legislative and institutional framework concerning
competition and state aid from the energy aspect, in order to submit to the competent
Ministry the initiatives for necessary adjustments for any further harmonization with
the EU requirements.
- Preparation of the National Plan for the reduction of adverse social effects caused
by implementation of the Treaty (the need to bring the cost of energy, particularly
electricity, to the economic level, internal rationalization of public energy enterprises
and improvement of their financial performance, retraining and additional training of
employees, new qualifications and skills, alternative employment programs, etc).
- Implementation of EU Directive 1999/32/EC relating to a reduction in the sulphur
content of certain liquid fuels and amending Directive 93/12/EEC,
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- Implementation of Directive 2001/80/EC EU on the limitation of emissions of certain
pollutants into the air from large combustion plants.
Moreover, the provision is made for the implementation of EU Directive 2005/89/EC
concerning measures to safeguard and improve security of electricity supply, in order
to ensure successful operation of the internal EU market and enable economic
development, adequate level of production capacities, proper supply/consumption
balance, and adequate level of interconnection between member states, which is
also binding regarding the reduction of technical and non-technical electricity losses
in transmission and distribution. The need for further establishment of regulatory
framework for operators of transmission and distribution systems, and for the
development of their respective networks calls for harmonization of laws and
administrative provisions with EU Laws and Directives.
The provision is also made for the implementation of EU Directive 2004/67/EC
concerning measures to safeguard security of natural gas supply and the Regulation
1775/2005 on access conditions to the natural gas transmission network.
On 12 March 2001, Serbia and Montenegro ratified the UN Framework Convention
on Climate Change and attained the status of a non-Annex 1 Party. Soon-expected
ratification of the Kyoto Protocol will open the door to the implementation of projects
related to energy efficiency and renewable energy sources through the Clean
Development Mechanism (CDM projects), but it is first necessary to prepare a
strategy for the application of the Clean Development Mechanism and to set up the
relevant institutions– the Designated National Authority (DNA) for the approval of
CDM projects.
The mid-term priority of the energy sector is to ensure rational use of good-quality
energy sources and to increase energy efficiency in production, distribution and
consumption of energy on the side of end-users of energy services. In order to
achieve this priority, the development of the Program for the rational use of energy
and increased energy efficiency at the level of the entire energy system of the
Republic of Serbia is planned. In the area of legislation, the Law on Rational Use of
Energy is planned to be enacted, and the Energy Efficiency Fund is also to be
established according to the Energy Sector Development Strategy until 2015.
The development of the Program for selective use of new renewable sources of
energy is also planned in order to reduce consumption of fossil fuels, decrease
import dependence and achieve the production of electrical and thermal energy with
much lower adverse environmental impacts.
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The creation of electricity market implies setting electricity prices that cover costs of
production, transmission and distribution, which should enable sustainable
development and attraction of investments. Realistic, economic electricity prices are
a prerequisite for the attraction of investments into energy sector, and only the
appropriate pricing policy may provide support to the development of energy market
in the Republic of Serbia (while the policy toward the poorest consumers should be
moved out from the business funds of energy entities by preparing a Social Welfare
Program for vulnerable population).
Price at which energy is supplied to tariff customers and price of services provided to
tariff customers will be set by energy entity in charge of supplying tariff customers
according to the previously obtained opinion of the Energy Agency. The Government
shall give its approval to the pricing act.
Since the increase in use of natural gas is one of the essential strategic directions for
the energy sector development in the Republic of Serbia, the natural gas sector
should also be provided with substantial capital investment. Diversification of supply
sources and routes is the basic principle to be kept in mind in the development of this
sector. The most significant capital investment in this sector is the construction of
natural gas storage. Another very important investment is the construction of a
southern branch of the natural gas transport system from Nis to Dimitrovgrad, in
order to ensure the second supply route. Furthermore, our gas pipelines should be
connected with those in Bosnia and Herzegovina, Romania and Croatia.
In the mining sector, all features of the relevant strategy are led by the basic market
reforms and are adjusted to the environmental protection requirements by the
reconstruction of mining sector in the Republic of Serbia and by proving the stability
of mineral resources and the market supply security. It is also necessary to set a
solid legal and institutional framework, starting with preparation of the National
Mineral Policy. Particularly needed is the support for establishment and operation of
the Mining Agency, as a separate organization for professional activities that will take
part in investment promotion, preparation of the strategy for development of mineral
resources of the Republic of Serbia, sustainable development, and reserve balancing
for all mineral resources. It will also participate in preparation of documentation for
granting concessions for exploration and mining of mineral resources and in
preparation of by-laws and rules on technical norms, and other technical regulations.
In order to provide funds for fostering protection and improvement of mining and
geological explorations, the Mining Investment Fund will be established as a public
financial fund that will particularly serve as a support to private initiative in small and
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medium-sized enterprises operating in mining sector. In order to provide the relevant
data related to mining and geological explorations, the activities directed towards the
improvement of the information system in this segment will be continued. The
operation of inspection services for this sector will be improved, particularly those
related to occupational health and safety, but also those related to controlling the
collection of fees for the use of mineral resources.
In the Republic of Serbia there is a total of 55 public utility enterprises with production
and supply of thermal energy as their core activity. The total installed thermal power
in boiler units is 6600 MW, which makes district heating plants an important segment
in the energy system of the country. The data on age are the best indicator of the
condition of this system: the average age of boilers is 28 years, of distribution
network – 20.6 years, and of substations – 20.5 years. Due to its age, the distant
heating system needs to be revitalized, but applying modern technical solutions that
will ensure a reliable operation and positive effects both in terms of energy savings
and the environment. The prerequisites for this are good-quality and well-elaborated
projects and changes in tariff policy (introduction of measurement), thus helping to
attract investors and create conditions for favourable loans.
The process of legislative, institutional and structural reforms in mining and energy
sectors has been completed and is to be followed by the revitalization process, i.e.
the process of making functional the implemented reforms. It is therefore necessary
to direct international support to the capacity building of the Ministry of Mining and
Energy and of other relevant institutions and to develop and implement reforms in
this segment. This certainly indicates a clear need for experts, technical support and
training.
Based on the analysis above, it is possible to conclude that the priorities for reforms
in the entire mining and energy sector in medium term are:
• Modernization of the existing energy facilities in the sectors of oil, natural gas, coal
and electricity, in order to create conditions for safe and reliable operation of
energy systems and safe and reliable supply of energy and energy products to
consumers,
• Rational use of good-quality energy sources and improvement of energy efficiency
in production, transmission, distribution and consumption of energy,
• Creating conditions for wider use of renewable energy sources
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• Rationalization and restructuring of public enterprises performing energy-related
activities,
• Restructuring and privatization of public and socially-owned mining enterprises,
• Creating incentives for private investments into mining and development of small
and medium-sized mining enterprises,
• Construction and modernization of energy infrastructure,
• Establishing national, competitive market in electricity and gas,
• Creating regional market in electricity and gas in the Southeast Europe and
integration into the internal energy market of the European Community,
• Improvement of environmental protection in energy sector
• Harmonization of legislation with the EU legal system, implementation of EU
Directives relevant for this area, putting in place new, modern, technical legislation,
regulations and standards;
• Institutional capacity building in the Ministry, Agencies and other institutions,
• Improvement of analytical capacities.
Basic objectives of business policy of the Power Industry of Serbia (JP EPS) are:
reliable supply of customers under economical and environmentally friendly
conditions while reducing import of electricity; economic/financial,
technical/technological, organizational and management consolidation; opening of
domestic market, involvement in the regional electricity market and establishment of
influential position in the region; improvement of environmental protection, and
reaching the EU standards in this field.
Strategic priorities of EMS are: higher system safety, lower losses in transmission,
better supply of customers (electricity quality), development of inter-connective
abilities (considering the position of Serbia and the number of the surrounding power
systems), mobilization of domestic economic resources as much as possible in all
new projects, and improvement of environmental aspects induced by this technology.
Reform and investment projects mentioned in Tables 20a and 20b directly contribute
to the implementation of the above-mentioned priority goals. To that effect, aside
from provision of budget funds and own funds of public energy enterprises, in the
coming period, the financial and technical support from the international community
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will still be needed for the implementation of the mentioned projects, as well as the
loans granted under conditions more favourable than those obtainable on the market.
An important source of funds for the development of energy and mining sector in the
coming period will be concessions and foreign direct investments.
The Energy Law, in accordance with the Priority Programs presented in the Energy
Sector Development Strategy of the Republic of Serbia until 2015, provides for
Strategy Implementation Programs (SIP) for the period 2006-2010. In power sector,
the following modules are envisaged:
• Module –Hydro power plants,
• Module – Thermal power plants and thermal power/district heating plants,
• Module – Power distribution system,
• Module –Power transmission system,
In oil and gas sector, the following modules are envisaged:
• Module – Srbijagas
• Module – Transnafta
• Module – Oil industry
In coal mining:
• Module - Underground coal mining
• Module - Open pit coal mining
In general energy sector:
• Module - City district heating plants and individual boiler rooms
• Module – Industrial energy
• Module - Energy efficiency
• Module - Fund for energy efficiency and renewable energy sources
• Module - Environmental protection
• Module – Renewable energy sources
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The SIP Programs are to be adjusted to the real energy demand at least every other
year.
Table 20a. Priority reform projects in the mining and energy sector in the period 2007-2009
Data about sources of funding
Project name Institution in
charge
Estimated project value (EUR)
Own funds
External funding sources
Planned start of project
implementation
1. Development of a detailed Action Plan for the implementation of the Treaty Establishing the Energy Community,
MoME 7,400,000 2,000,000 5,400,000 2007-2010
2. Capacity building of the Ministry of Mining and Energy for the implementation of the Treaty Establishing the Energy Community
MoME 200,000 2007,
3. Program of social protection of vulnerable groups that may be affected by the opening of the electricity and gas market
Ministry of Labour, Employment and Social Policy with the support of MoME
800, 000 2007,
4. Project for establishment of mandatory reserves of oil and oil derivates
MoME, MTTS, MF
500,000 2007,
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5. By-laws to be adopted pursuant to the Law on Pipeline Transport of Gaseous and Liquid Hydrocarbons and Distribution of Gaseous Hydrocarbons, when enacted by the National Assembly
MoME 200,000
2007,
6. Law on Storage and Reloading of natural Gas and pertaining by -laws
MoME 100,000
2007,
7. Legal acts to regulate the area of compressed natural gas
MoME 100,000
2008,
8. Legal acts to regulate the area of liquefied natural gas
MoME 100,000
2008
9. Drafting of the Law on Rational Energy Use
MoME 50,000 2007
10. Setting up of the database of energy indicators and training of experts including energy managers
MoME 200,000 2007,
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11. Setting up of the database of energy indicators and monitoring of the Strategy Implementation Program for electricity
MoME 380,000 180,000* 200,000 2007,
12. Setting up of the database of energy indicators and monitoring of the Strategy Implementation Program for oil and gas
MoME 380,000 180,000* 200,000 2007,
13. Capacity building of the Ministry for strategic planning in the field of developing indicators and energy analyses (permanent expert working group)
MoME 400,000 2007,
14. Monitoring of Strategy Implementation Program for coal mining
MoME 350,000 2007,
15. Development of the study on incentive mechanisms for the use of renewable energy sources
MoME 200,000
2006
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16. Development of the CDM project strategy for energy sector related projects
150,000 2006
17. Analysis of the conditions for the functioning of mechanisms of funding “third party” energy efficiency projects on the basis of energy savings achieved by the project (conditions for the operation of ESCOs)
40,000
18. Preparation of the review of possibilities of implementing acquis communautaire relating to energy efficiency in domestic legislation
50,000
2007
19. Mineral Resources Management Strategy
MoME 200,000 200,000 2006
20. Development of by-laws
MoME 600,000 600,000 2007
21. Capacity building in the Mining Department
MoME 1,000,000 2007
22. Establishment of the Mining Agency
Government, MoME
3,500,000 1,500,000 2,000,000 2007
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23. PORTAL project (IT) – completion of the entire information system for mining and geology
MoME 1,500,000 500,000 1,000,000 2008
24. Project of support to the restructuring and privatisation of JP PEU (public company for underground coal exploitation)
MoME 18,000,000 Subsidies
10,000,0008,000,000 2007
25. Projects for the closure of coal mines and alleviation of consequences
MoME, MF 50,000,000 50,000,000 2008
26. Development of the application and implementation in our legislation of the EU Directive 2005/89/EC providing for the measures of safeguarding and improving the security of electricity supply, to ensure successful operation of the internal market
MoME 300,000 2007
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Table 20b. Priority investment projects in the mining and energy sector in the period 2007-2009
Data about sources of funding
Project name Institution in
charge
Estimated project value (EUR)
Own funds
External funding sources
Planned time of project
implementation
1.Macro project of pipeline transport of oil products through Serbia – product pipeline system
MoME /JP TRANSNAFTA Pancevo
424,000,000 30% 70% 2006-2010
2.PEOP (Pan European Oil Pipeline)
MoME/JP TRANSNAFTA Pancevo
298,000,000 15% 85% 2006-2014
3.Underground gas storage Banatski Dvor
MoME / JP SRBIJAGAS Novi Sad
89,500,000 NIP
11,000,000
2007
4. High pressure gas pipelines in different directions
MoME / JP SRBIJAGAS Novi Sad
207,292,000 2007-2009
5. Plan of environmental protection measures and activities in NIS a.d. Novi Sad –Petrol –Pancevo Refinery
MoME/NIS a.d. Novi Sad
155,000,000 ~23,250,00
(15%)
~131,175,000
(85%)
2007-2009
6. Plan of environmental protection measures and activities in NIS a.d. Novi Sad –Petrol –Pancevo Refinery
MoME/NIS a.d. Novi Sad
49,300,000 ~7,395,000
(15%)
~41,905,000
(85%)
2007-2009
7.Replacement of insulation and windows as well as application of solar collectors for rendering
MoME 90,000,000 10,000,000
(NIP) 2007-2009
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heating services to households
8.Mining Investment Fund
MoME, MF,
Development Fund
20,000,000 20,000,000 2007
9. Drainage of open pits Drmno – Kostolacki basin and Polje B – Kolubarski basin
EPS - Strategy and Investment Directorate
30,000,000
30,000,000
2008
10.Implementation of the Environmental Action Plan for the „Tamnava – Zapadno Polje“ open pit of the Kolubara mining basin
EPS - Strategy and Investment Directorate
10,000,000 10,000,000 2007.
11.Implementation of the Environmental Investment Plan upon the closing of „Klenovnik“ open pit of the Kostolac mining basin
EPS - Strategy and Investment Directorate
40,000,000 40,000,000 2008
12. Implementation of the Environmental Investment Plan upon the closing of “Cirikovac“ open pit in Kostolac
EPS - Strategy and Investment Directorate
130,000,000 130,000,000 2009.
13.Construction of the ash and slag landfill of TE (thermal power plant)
EPS - Strategy and Investment Directorate
15,000,000 15,000,000 2009
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Kostolac B in the free spaces of the open “Cirikovac“ open pit
14.Revitalization of HE (hydro-power plant) Zvornik
JP EPS Strategy and Investment Directorate and PD „Drinsko Limske HE“ HE Zvornik
40,000,000
15.Reconstruction of the ash and slag transport and disposal system TENT-A
JP EPS Strategy and Investment Directorate and PD TE „Nikola Tesla“,d.o.o.
34,600,000 2008.
16.Reconstruction of electric filters for blocks A3, A4 and A6 of TE Nikola Tesla A
JP EPS Strategy and Investment Directorate - Environmental Protection Division
18,000,000 Partly own funds
RS Environmental Fund
2007-2009
17. Addressing problems of PCB filled electric devices in JP EPS (Pyralene oil)
JP EPS Strategy and Investment Directorate - Environmental Protection Division
3,000,000 NIP in cooperation with the Ministry of Science and Environmental Protection
2007-2008
18. Flue gas desulphurisation plant in TE Kostolac B
JP EPS Strategy and Investment Directorate and PD '' TE-KO Kostolac '' Kostolac
85,000,000 Japanese Government and other sources
85,000,000
2007-2008
19. Flue gas desulphurisation plant in TE Nikola Tesla B
JP EPS Strategy and Investment Directorate and PD TE „Nikola Tesla“,d.o.o.
120,000,000 120,000,000 2009.
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20.Hydroenergy and navigation system “Djerdap 1'' – equipment replacement of the lock ''
JP EPS Strategy and Investment Directorate and
PD ''Hidroelektrane Djerdap'' D.O.O. Kladovo
15,500,000
21. Construction of the 220/110 kW Bistrica TS with connection power lines
JP EMS 8,000,000 8,000,000 2007
22. Construction of the 400 kW power transmission line Romania - Serbia
JP EMS 12,000,000 12,000,000 2007
23. Construction of the 400/110 kW TS Vranje 4 with connection power lines
JP EMS 9,000,000 9,000,000 2008.
24.Extension of the 400/220/110 kW TS Smederevo 3
JP EMS 7,000,000 7,000,000 2008.
25.Allocation of capacities based on explicit auctions
JP EMS 400,000 400,000 2007.
26.Reconstruction of TS Beograd 1 (110/35/10 kW)
JP EMS 5,420,000 5,420,000 2009.
27.Contruction of 110 kW power transmission line Kraljevo – Raska (60 km)
JP EMS 3,600,000 3,600,000 2007.
28.Replacement of JP EMS 3,200,000 3,200,000 2008.
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PTL 220 kW HE B. Basta - TS B. Basta (2x8 km)
29.Rehabilitation of TENT B Control system
JP EPS Strategy and Investment Directorate and PD TE „Nikola Tesla“, d.o.o.
8,500,000 8,500,000 2007
30.Implementation of Energy Sector Development Strategy part relating to the existing and new heat energy sources – city heating plant and industrial utility plants
70,000,000 2007
31.Establishment of the fund for the rational use of energy – through which the POS of energy efficiency and selective use of renewable forms of energy will be implemented
MoME 100,000,000 2007
32. Realization of Strategy priorities
- Priority Programs: Rational use of energy sources and increasing of energy efficiency in energy consumption
300,000,000 2007
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sectors
- Priority Programs: Selective use of renewable energy sources and new energy technologies
* funds proposed for the 2007 Budget but not yet approved
3.7. Trade, Tourism and Services
High growth of GDP in the Republic of Serbia over the last five years was achieved
owing to the constant growth of the services sector (average annual rate of growth
was 7%), primarily in trade (15%). The structure of gross added value also changed
in favour of services, mostly as a result of high average growth of whole sale and
retail. This trend should continue in the future, because that is the feature of
countries which are at higher level of economic development. That is why the
activities of the Ministry of Trade, Tourism and Services were focused on
accelerating the process of accession to the EU, harmonisation of legislation with the
EU legislation, building of powerful, market-oriented institutions, improving access to
new markets and integration with the regional and global markets, with a view to
faster developing the private sector and restructuring companies in trade and
tourism.
Major projects of the Ministry of Trade, Tourism and Services in the period 2000-2005:
1. Project for recruitment of experts for the support to the implementation of the Law on the Protection of Competition.
CARDS 2005 –Feb... 2006
2. Project for the recruitment of experts for the support to the implementation of the Law on Consumers Protection
CARDS 2005 - March 2006
3. Technical support for the promotion of projects in tourism
Government of Japan
Јuly -Dec 2005
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The reform of the trade, tourism and services sector is based on a defined strategic
and institutional framework. The strategic development framework has been
determined in the following national documents: the National Strategy for the
Accession of Serbia and Montenegro to the EU, the Poverty Reduction Strategy, the
Communications Strategy, Trade Strategy and Policy of the Republic of Serbia and
the Strategy for Tourism. The Commission for the Protection of Competition
(established on 18 April 2006) and the Council for Consumers Protection of the
Minister established on 18 April 2006).
Over the last few years, laws regulating this sector of the economy were enacted
which helped, to a great extent, the harmonization of domestic legislation with the EU
standards. During 2005 the following laws were adopted: the Law on Tourism, the
Competition Protection Law, the Consumers Protection Law, the Law on Prices and
the Law on Advertising. Apart from these laws, other new laws and amendments of
the existing ones should be adopted in the course of 2006. Thus, the legislative
framework in the field of trade and tourism should be completed with a view to
harmonizing domestic regulations with the EU regulations.
Ensuring freedom of movement of goods is one of the essential elements for creating
a single market, which most of the EU legislation refers to. In the first phase, it is
necessary to harmonise domestic legislation with the conditions for the signing of the
Stabilisation and Association Agreement. That means that domestic legislation
dealing with the regulation of the market and international or external exchange must
be completely adjusted to the basic principles of the freedom of movement of goods,
such as the principle of non-discrimination of domestic and foreign goods on the
market, harmonised customs tariff (harmonized system – tariff classification), as well
as with the WTO rules in this field (for example, the Agreement on Technical Barriers
to Trade, the Agreement on Sanitary and Phyto -Sanitary Measures). For that
purpose, it will be necessary to pass the Law on Trade (procedure is underway), and
for its efficient implementation, a number of laws within the competence of other
ministries will also have to be enacted. Draft National Programme for Consumers
Protection for the period 2007-2012, which the Government is to adopt, defines the
strategy and policy of consumers protection. Goals and tasks, and particularly
capacity strengthening of the governmental and nongovernmental sectors in the area
of consumers protection have been defined.
In the field of tourism, the Law on Tourism and the Tourism Development Strategy
have been adopted with an aim of reorganizing and privatizing state-owned tourist
companies, promoting management and marketing in tourism, renovating tourist
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facilities, specializing the tourist offer. All this will provide for greater competitiveness
in the sector of tourism, higher foreign-exchange revenues from tourism and an
increase in employment in the sector of tourism. For that purpose, the following laws
were passed: the Law on Health Spas, the Law on Ski Resorts, as well as other
regulations from this area. In the medium-term, tourist infrastructure will be improved
as a result of greater capital investments by investors interested in tourism and
catering. A modern data bank will be established which will enable the monitoring of
various tourist components, identical to the European Satellite Bookkeeping which is
important for the defining of macroeconomic frameworks.
In the field of trade and consumers protection, privatization and restructuring of the
large retail and whole-sale systems will be carried out. Also, promotion of
competitiveness, price and market stability and consumers protection according to
the EU regulations and standards will be ensured. Special attention will be paid to the
process of integration, cooperation and concentration of trade like in the EU trade.
Internal trade will be reformed and promoted in line with the provisions of the Law on
Trade, the Law on Prices, the Law on Advertising, the Consumers Protection Law,
while on the basis of the adopted Trade Development Strategy, which defines the
structure of trade and trade networks, the manner for ensuring trade capital, the trade
internationalisation process, specificities of regional development of trade, ways to
protect consumers, development of a modern management and marketing in trade,
and promotion of electronic trade will be developed.
Promotion of internal (domestic) market and trade calls for harmonization within the
area of introducing competition rules, protection of intellectual property rights,
industrial and commercial property rights, implementation of the public procurement
procedure, application of technical standards and regulations adjusted to those of the
EU, strengthening of the quality infrastructure (standardization, metrology,
accreditation), consumers protection, improvement of veterinary and phyto-sanitary
control, implementation of quality control regulations, and food and chemicals safety
rules.
Government’s strategic orientations in the area of trade are: trade liberalization,
strengthening of competition, building of new trading structures and trading networks,
encouraging the process of company concentration, introducing new forms of retail
trade, computerization of business processes, attracting foreign investments,
completing privatization and developing e-trade.
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The following goals will have to be achieved in the area of tourism: promoting competitiveness in tourism, increasing foreign exchange revenues, growth of turnover from domestic tourism and increase in employment.
The signing of the Stabilization and Association Agreement with the EU, expected by
the end of 2006 will create legal basis for the establishing of free trade zones
between the Republic of Serbia and the EU. This means that once SAA comes into
force, the EU will eliminate its customs and non-customs protection of trade for
agricultural and industrial products with Serbia, and Serbia will do the same in the
transition period which will be agreed on at a later stage. The process of common
market expansion and the strengthening of mutual economic links with the countries
from the region in accordance with the free trade agreements will be continued with
the view of creating free trade zones. To this end, a multilateral agreement on free
trade will be concluded, tariff barriers will be lifted, trade procedures facilitated and
cooperation in the domain of services will be strengthened.
Medium-term priorities in trade, tourism and services are as follows:
1. Implementation of the Stabilisation and Association Agreement in the field of
competence of the Ministry of Trade, Tourism and Services (MTTS) competences
by harmonizing laws and regulations with Acquis Communautaire (2009-2010);
2. Affirming free trade and relevant institutions and mechanisms (2007);
3. Developing internal market characterized by conditions that are equal to the
conditions existing on the EU single market (2010);
4. Ensuring high level consumers protection, guaranteed quality and safety of
products and services and efficient market monitoring measures (2007);
5. Adjusting the MTTS capacities- organizational and working methods with the
needs for efficient functioning in the field of trade, tourism and services (2007);
6. Building of tourist and utility infrastructure in priority tourist destinations (2012);
7. Promoting and developing IT system for tourism (2010);
8. Developing a regulated legal framework and instructions for the promotion of
tourism through a model of public and private partnerships at all levels (2012);
9. Establishing transparency of activities for interested parties.
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For achieving the above priorities, the Ministry of Trade, Tourism and Services has
proposed the implementation of the following projects (table 21):
Table 21 - Priority projects in the field of trade, tourism and services in the period 2006- 2009
Sources of funding
2009Project title Institution in charge
Estimated project
value (in EURO)
Own funds
External sources of
funding
Planned start of project
implementation
1. Support to the implementation of the Law on the Protection of Competition
МТТS 2,000,000 2,000,000 Last quarter 2006
2. Support to the implementation of the Consumers Protection Law
МТТS 2,000,000 2, 000,000 Last quarter 2006
3. Developing the national brand of the Republic of Serbia
МТТS 600,000 300,000 Last quarter 2007
4. Promotion of inspection services in the field of trade, tourism and services
МТТS 500,000 500,000
Kingdom of Norway
Last quarter 2006
5. Promotion of intellectual property rights protection
МТТS 400,000 100,000 300,000 2007
6. Installation of tourist signalization МТТS 300,000 150,000 150,000 2007
7. Developing integral IT system in tourism in the Republic of Serbia
МТТS 100,000 50,000 2008
8. Capacity strengthening of the congress bureau
MTTS 600,000 300,000 300,000 2007
The proposed projects in the trade sector are directed to capacity strengthening for
the implementation of the laws that were harmonized with the EU standards and to
improving the competitive position of the Republic of Serbia (subsequently EAR
selected the Commission for the Protection of Competition to be the user of the
Project for the support to the implementation of the Law on the Protection of
Competition). Most of the projects in the area of tourism are also aimed at the
strengthening the institutional capacities of the Serbian tourist system, which should
create the grounds for future development of tourism in accordance with the said
goals. They are in line with the Strategy for the development of tourism which was
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adopted by the Government of the Republic of Serbia and which provides for the
implementation of the following action plans: The Plan for the development of
competitive tourist sector in Serbia, the Marketing plan and the Investment plan
which contain guidelines for the development of Serbian tourism, as well as
proposals for future investments.
Apart from the listed projects, projects that would lead to greater support of small and
medium-size enterprises, an increase in direct foreign investments, completion of the
privatisation process and development of electronic trade and tourism should also be
proposed.
3.8. Education and Sports
In the Republic of Serbia, despite the developed network of elementary schools,
there are still 233,000 completely illiterate inhabitants over the age of 10, which
makes up for 3.5% of the total population. Apart from this, educational structure of
the population is unfavourable and 22% of the inhabitants have only elementary
education. The fact that 69% of the poor in the Republic of Serbia are people with
elementary or secondary education, while only 2% of the poor are persons who have
higher education shows how important education is for poverty reduction. Low level
of expenditures for education (3.3% of BDP) has an adverse effect on the access to
education of the poorest groups, as well as on the quality of education.
The main problems of the education system are as follows:
• “Inflexibility” of the system in providing opportunities to chose or change
ones occupation while in school, which subsequently leads to the need for
retraining of workers.
• Brain-drain of thousands of young persons who are leaving the country
during and after secondary education adversely affects the most important
sectors for development-electrical engineering, IT, technology, medicine,
pharmacology;
• Drop-out before graduation– this problem is particularly present in
vocational schools and universities;
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• Lack of standards and systems for the protection of the quality of education,
which prevents the establishment of good educational institutions, with a
system of accreditation and certification;
• Inability to meet the needs of employers for workers with certain skills
(analytical skills, knowledge of concepts and software tools).
Since 2001 the educational system has been modernized with an aim of making it
more efficient and improving the quality of knowledge in order to ensure greater
contribution of the educational system to economic development and social progress
in the Republic of Serbia and bringing Serbia closer to the EU. Rationalisation and
reorganization of educational institutions at all levels is underway. Also, programs of
training and professional development of teachers and programmes for revising
curricula are in progress. However, significant results have not been achieved neither
in decentralization and democratisation of the educational system or in linking
schools to the labour market, nor in improving the quality of curricula and contents of
educational programmes, system of grading students, vocational and specialization
studies for teachers, equipping schools and introducing new educational profiles.
In the period 2000-2005, 106 million euros of international assistance were invested
in the sector of education, of which the major part was invested in the reform of the
educational system and improvement of schools, as well as in the training of
teachers. A programme of modernization and development of secondary vocational
education in the Republic of Serbia from 2003 was supported by an EU experimental
project implemented within CARDS programme in 55 vocational schools in the
Republic of Serbia.
Major projects of the Ministry of Education and Sports (MES) in the period (2000-2005):
1. Development of education in the Republic of Serbia
WB 10,000,000 USD 2002 -
2. Teacher education and professional development - National centre for teacher education
SDC 60,000 EUR 2002-2003
3. Secondary education reform CARDS 4,000,000 ЕUR 2003 -
4.PISA project OECD 2003
5. Establishing the Centre for teacher education and professional development in Nis
Government of Norway
1,315,000 ЕУР 2004 -
6. Teacher education and professional development in the Republic of Serbia
CIDA 2,000,000 CAD 2004-2007
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7. Reform of vocational education in the field of economics, law and administration
GTZ 1,300,000 ЕUR 2004-2006
8. Improvement of schools EIB 25,000,000 ЕUR 2005 -
9. Construction and equipping of schools in the Zajecar region
Government of Norway
1,987,600 ЕUR 2006
10. Support to education of minorities and the Roma
OSCE 350,000 ЕУР 2005-
11. Towards more efficient implementation of reforms –the system of planning, budgeting and monitoring MES activities
Government of Norway
30,000 ЕUR 2006
12. Healthy start – healthy lifestyle – Specific sporting equipment for pre-school institutions and training of employees (1)
Government of Norway
88,000 ЕUR 2006-
The main goals of the educational system reform in the Republic of Serbia are as follows:
• Inclusion of vulnerable groups of population and persons with special needs in
the system of education based on proposed measures of affirmative action by
expert teams, and simultaneous realization of specific seminars to train teachers
for work with children with special needs;
• Improving education quality through programme rationalization, establishing
quality in special educational fields, primary and secondary teacher training and
approving new text-books.
• Continuation of the reform of secondary vocational education including:
evaluation of the pilot programme for introducing new educational profiles in
vocational schools and its implementation in a large number of schools,
introduction of extra-curricular programmes in high-schools and changes in the
regular learning programs.
• Ensuring a system for acquiring qualifications for adults.
The priority in poverty reduction in the field of education calls for increased efficiency
of the educational sector, i.e. educational reform in line with the needs of a market
economy and development of the private sector and, at the same time, full inclusion
of vulnerable categories of the population and ethnic minorities (rural population, the
Roma, children with disabilities, refugees and internally displaced persons) in the
formal system of education. This calls for the reform of the pre-school education,
including programmes (with adequate human resources support) for the widest
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possible inclusion of children from poor families, increasing the general level of
education among the Roma, as well as improving qualifications of the unemployed.
In view of the needs of the economy the goals of the reform of the secondary, post-
secondary and university education are the following:
• Streamlining education not only to improving the basic, but also applicable
knowledge and linking activities with the labour market;
• Developing the readiness of young people for professional development and
additional training, harmonization of the diplomas and qualifications with the
international standards, and diversifying institutional models, programmes and
working methods;
• Reforming curricula with an aim of achieving functional, computer and
technological literacy, by stimulating creativity, critical thinking and necessary
skills for each individual;
• The development of the educational system should be based on the philosophy
of life-long learning. In line with such philosophy measures for encouraging
employers to invest into improvement of knowledge and skills of employees will
be needed in order to help them become part of the process of change and
technological modernisation of the economy.
The major strategic document for the development of education and sports in the
Republic of Serbia is the Strategy of the Ministry of Education and Sports for the
period 2005-2010. In addition, the National Action Plan for Children, Poverty
Reduction Strategy and Draft Policy and Strategy of vocational education in Serbia
are part of the strategic development strategy. International documents streamlining
the development of the system of education in the Republic of Serbia include: The
European framework for enhancing vocational education and training, the Millennium
development goals, the Strategic goals of education and training in the EU countries
and the Bologna declaration.
The Law on the Basis of the System of Education and Training from 2003 and the
Law on Higher Education, enacted in 2005, regulate the system of education in
Serbia. The drafting of the following laws is underway: the Law on Pre-school
Education, the Law on Fine Arts Education and Training, the Law on Text -Books
and other Teaching Tools, the Law on Student Standard, while the possibility of
enacting the Law on Primary Education and the Law on Secondary Education which
would define the specificities in relation to the system law on education is considered.
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Institutions that are in charge of implementing the reform in this sector are: the
Ministry of Education and Sports, the Directorate for Sports, the Administration for
the Promotion of Education and Training and the Administration for the Evaluation of
Education and Training.
The reform of the system of education will be further continued with an aim of
improving its quality and efficiency and access to education for all, in accordance
with the principles of life-long learning and adjusting the system of education with the
development principles in education in the EU. The plan is to start the school year
2006/2007 with the implementation of the nine-year program of compulsory
education with preparatory pre-school program included. Similarly, greater
participation of adult population in educational and learning programs and projects is
expected. Developing of distance learning is also planned.
The system of higher education will be promoted with an aim to reducing the average
time spent before graduation and increasing the number of graduated students in
relation to the number of enrolled. Special effects of the implementation of the Law
on Higher Education are expected in the school-year 2006/2007. Adjusting curricula
with the principles of the Bologna Declaration, the accreditation and transformation of
post-secondary schools into institutions of higher education are the goals whose
implementation will contribute to better and more useful system of higher education.
In order to completely achieve the goals and tasks of the reform of the system of
education, particular attention shall be paid to stable financing of educational
institutions from the budget of the Republic of Serbia and local self- government
budgets. In order to meet the basic conditions for educational and training activities
in schools it will be necessary to continue the reconstruction, repairs and expansion
of buildings, as well as equipping of classrooms, laboratories and gyms. Efforts to
create a single IT network for all schools and multimedia workshops will be
intensified.
The creation of an open and a flexible system of vocational education adapted to
demographic, social, economic, technical and technological needs as a key
precondition for the promotion of human potential and successful integration of the
Republic of Serbia into the European cultural and economic space is the major long-
term goal in the area of education. In order to achieve such a strategic goal in the
field of education, it will be necessary to establish national councils for education at
all levels, create a system of accreditation and certification in vocational education,
develop standardization in vocational education (occupational standard, educational
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standard), improve professional qualities of teachers and other employees, monitor
the quality at all levels of education and promote the funding of the system of
education.
In the Republic of Serbia, the Law on the Prevention of Spectators Violence and
Misbehaviour at Sports Events and the Anti-doping in Sports Law regulate the field of sports. The European Convention on Spectators Violence and Misbehaviour at
Sports Events and the Anti-doping in Sports Convention will also be applied. In line
with the duties and responsibilities of the Department for sports of the Ministry of
Education and Sports the priority will be given to the establishment of a new system
of organizing and funding sports, as well as to promoting and speeding up
international cooperation. In the process of accession to the EU a complete model of
sports and its role in the society will be adjusted. In order to achieve this aim a
National program for the development of sports will be adopted.
According to the above, the following medium-term priorities and goals have been set by the Ministry of Education and Sports:
• establishing of an efficient system of quality assurance at all levels of education
and training;
• decentralized system of education and training;
• creating opportunities for young people and adults to acquire skills, knowledge and
abilities required for employment, work, further education and learning;
• a new model of funding educational institutions has been established;
• promotion of capacities of the system of education and training for inclusive
education of children with special needs (children with disabilities);
• inclusive education for children with special needs by the end of 2011;
• system of support to talented pupils and students;
• promotion of adult education;
• promotion of inclusion of the Roma and improved quality of education of the Roma
population;
• developed capacities of the Ministry of Education and Sports and relevant
institutions for an efficient implementation of the EU programmes and
recommendations in the area of education and sports;
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• harmonised regulations in the field of education and training with the EU standards
based on priorities defined within the process of accession to the EU;
• organization of working methods and capacities of the employed in the Ministry of
Education and Sports correspond to the needs of more efficient functioning of
education, training and sports;
• reduction of the number of illiterate persons to by 10%;
• increase in the number of persons engaged in sports and recreational activities;
• creating conditions for the development of top-level sports and achieving results at
major international competitions;
• efficient management of resources in education and sports by applying a
comprehensive data bank at all levels of education and training.
The Ministry of Education and Sports has defined the priority projects that will
contribute to the realization of the said goals: (Table 22а and 22b).
Table 22а. Priority programme of reform activities in education and sports in the period 2007-
2009 Sources of funding
Project name Institution in
charge
Estimated project value
(in EUR)
Own funds
External sources of
funding
Planned start of project
implementation
1. Establishing National Agency for European Programmes in Education and Sports
МES 26,000,000 50% * 50% 2007
2.Support to education of minorities and Roma
МES 350,000 Roma Education
Fund, OSCE
2006
3. Е-learning –European structure of higher education in software engineering
Faculty of Natural
Sciences and Mathematics
Novi Sad
500,000 2007
4. Protection of national and cultural heritage – Our school
School of Art , Kraljevo
350,000 Government of Japan
2007
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5. Decentralisation of education – preparations for project implementation
МES 20.000 2006-2009
6. Key life and professional skills educational programme in primary adult education
МES 60,000 2006-2007
7. Special protocol for the protection of children from abuse and negligence
МES 12,000 2006
8. Training and
professional development of primary and secondary school teachers
МES
2,000.000
NIP
2007
Table 22b Priority investments activities programme in the field of education and sports in the period 2007-2009.
Sources of funding
Project name Institution in
charge
Estimated project value
(in EUR)
Own funds External sources of
funding
Planned start of project
implementation
1. Equipping gyms in primary schools
МES 1,358,800 Government of Korea
2007
2. Healthy Start- Healthy Lifestyle – Specific sporting equipment for pre-school institutions and professional development and training of employees
Sports and Recreational Club Zemun
240,000 2007
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3. The School for the Future – Evaluation and promotion of the educational process- Post-secondary School of Economics – Leskovac and provision of premises and equipment
Post-secondary school in Leskovac
4,053,271 2007
4. Construction of teachers accommodation facility – Post-secondary Business School in Blace
Post-secondary Business School – Blace
897,500 Government of Norway
2007
5. Laboratory for new technologies– Teaching equipment for Secondary Technical School – New Belgrade
Secondary Vocational Technical School – New Belgrade
169,928 Government of Norway
2007
6.Construction of a new building – Secondary Vocational Technical School – Tutin
Secondary Vocational Technical School – Tutin
1,850,000 Government of
Luxembourg
2007
7.Refurbishment of the Primary school "Bratsvo"in Novi Pazar
Primary school "Bratsvo"in Novi Pazar
179,235 Government of
Luxembourg
2007
8 . Renovation of the school building of Primary school “Mesa Selimovic” in Novi Pazar
Primary school Novi Pazar
946,780 Government of
Luxembourg
2007
9.Rеconstruction of School of Ecological –Meteorological Observatory
Faculty of Physics – University of Belgrade
375,000 Government of Japan
2007
10.Reconstruction of wash- rooms in Serbian schools
МES 40, 000 Swiss Government
2007
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11. Equipment for the physics cabinets in primary schools – basic educational tools
МES 2,750,000 Government of Spain
2007
12. Elevator – Faculty of Geography in Belgrade – assistance to our handicapped friends
Faculty of Geography – University of Belgrade
30,000 Korean Government
2007
13.Computer equipment for schools in Serbia
МES 90,000 Korean Government
2007
14.Equipping computer class-rooms and an internet-club at the Faculty of Philology in Belgrade
Faculty of Philology – University of Belgrade
30,000 2007
15. 30,000
computers for primary and secondary schools, post-secondary schools and universities in Serbia
МES
12,600,000
NIP
2007
16. Investments in
Universities at other institutions (primary, secondary, student standard)
MES
14,916,000
NIP
2007
17. Procurement of desks and chairs, other equipment and music instruments
МES
17,547,648
NIP
2007
18. Construction of
sports fields and gyms
МES
7,551,095
NIP
2007
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19. Investments into
sports facilities of national importance
Department of
Sports
8,760,000
NIP
2007
20.Construction and
reconstruction of big sports centres
Department of Sports
3,450,000
NIP
2007
21. Construction
and reconstruction of swimming pools
Department of Sports
5,006,718
NIP
2007
22.Sports building
and physical education hall
Department of
Sports
11,074,389
NIP
2007
23. Other sports
facilities
Department of Sports
466,777
NIP
2007
24. Procurement of
sporting equipment
Department of Sports
1,084,883
NIP
2007
Once the National Agency for European Educational Programmes is founded, our
system of education will be harmonized with the EU standards, and further
implementation of pilot programmes in cooperation with EU will contribute to this end.
The majority of remaining proposed programmes relate to investments into
reconstruction and equipping of schools and other educational institutions.
3.9. Culture
In the field of culture and the media activities were focused on the establishing new
relations in modern creativity. New cultural environments and programmes have
been created, and a balance was established between cultural creativity (capacity)
and cultural industry, private, public and nongovernmental sectors. In all areas of
modern cultural creativity the best quality projects from the whole territory of the
republic and of all peoples and ethnic minorities are supported, as well as
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international cooperation with both the countries from the region and throughout the
world.
The legislative framework from the period prior to transition has been changed and
amended with the enactment of new laws: the Broadcasting Law, the Media Law, the
Law on free access to information of public importance.
The medium-term strategic goals of the Ministry of Culture are focused on the
promotion of program, human resources and special conditions, as well as on the
normative framework for activities in the area of modern creativity, cultural industry,
international relations in line with the European standards.
This particularly refers to creating of normative framework for the work of the media,
creation of free media space and development of culture of freedom of information,
media pluralism, the culture of tolerance and dialogue and to the protection of human
and minority rights in this field.
In order to attain these goals the Ministry of Culture defined concrete activities which
need to be implemented in the forthcoming period:
Normative regulation of the network of institutions for the protection of movable and
real-estate cultural goods:
- Forming of a National institute for conservation and restoration;
- Forming of regional centres of the National institute for conservation and
restoration;
- Forming of a regional cultural centre for Kosovo and Metohija;
- Establishing of the National council for culture and nominating members of the
Council for the protection of cultural goods:
- Normative regulation of the theatre and cinema network:
- Establishing of a National centre for books and art digitalisation;
- Forming of the National Council for Culture and nominating members of the
Council in charge of modern creativity;
- Acceding to international conventions, primarily to those dealing with the
protection of cultural heritage and the media;
- Normative regulation of the concentration of the media and ownership
transparency;
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- Founding of the public company for the broadcasting of radio and television
programmes and relay transmitting;
- Ensuring the development of independence and professionalism (expertise) of
regulatory bodies;
- Ensuring the implementation and respect of the media legislation and achieving
freedom of the media, freedom of thought and expression from the perspective
of human freedoms;
The priorities in the field of culture and the media are as follows:
• Development and enactment of the lacking regulatory framework;
• Development of programs of reform of institutions and human resources
base; and,
• Completion of the privatisation process of the media.
If the said goals are achieved in the medium term, the majority of reforms in culture
will be implemented in line with international standards. To this end, in the following
three years, the Ministry of Culture plans to implement the projects listed in Table 23
below:
Таble 23. Priority projects in the field of culture in the period 2007-2009.
Sources of funding
Project title Institution in charge
Estimated project value
(in EUR)
Own funds External sources of financing
Planned start of the
implementation of the project
1. Refurbishment and reconstruction of the Museum of Modern Art in Belgrade
MC 6,470,000 3, 683,000 (NIP)
2006 - 2008
2. Reconstruction of the existing and expansion of the National Theatre in Subotica building
MC 23,000,000 70,000 budget of R.
Serbia,70,000 budget of Vojvodina
and
3,278,000 (NIP)
2007
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3. Refurbishment of the Museum of Science and Technology
MC 4,700,000 4,435,000 (NIP)
2006-2008
4. The Printed Media Council (project name changed)
MC 280,000 28,000 2007
5. Launching of newspapers in Roma, Albanian and Bosnian
MC 1,740,000 520,000 2007
7. The Old mill project – Centre for education and management in the protection of cultural heritage, Sremski Karlovci
MC 3,290,000 58,000 2007
8. National Digitalisation Centre
MC 150,000* 2007
9. Acceding to international conventions (Council of Europe and UNESCO)
MC 2006
10. Forming of Centre for cultural and spiritual creativity
MC 400,000 108,000 70,000
County council Karas- Severin
2006
11. Sculpturing stone training workshop, Krusevac
MC 117,000 12,000 2006
12. Establishing workshops for the preservation old arts and crafts.
MC 117,000 2007
13. Implementation of five projects for the maintenance of environmental-ambiance setting in Velika Hoca
MC 150,000 2006
14. Founding of digital –tone studio of the Belgrade Philharmonic Orchestra
MC 650,000 2007
15. Regional creative centre Jozef, Nadj, Kanjiza
650,000 95,770 (NIP) 2004-2007
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16. International ethno centre, Babka, Kovacica
500,000 3,300 93,000
EUR Slovakian
Government
and
220,000 EUR
International Organization
for Traditional
Arts
2005
17. Project –eco-ethno museum, Golubnici
350,000 In 2005 paid amount
3,735,000 dinars.
333,000 (NIP)
2005-2007
18. Reconstruction and expansion of the National Museum in Belgrade
24,054,800 EUR
In 2005 amount paid 38,200,000
dinars
6,682,000 (NIP)
2006-2011
19. Reconstruction of Film-library/ archives building
5,000,000 In 2005 amount paid 27,000,000
dinars
5,185,000 (NIP)
2006
20. Construction of a warehouse for storing films in the Film library/archives in Belgrade
5,500,000 5,122,000 (NIP)
2006-2007
21. Preservation, repairs of the building of Serbian Archives
1,370,000 1,751,000 (NIP)
2006
* The project value should be assessed in cooperation with the relevant Ministry
The majority of the listed projects concern reconstruction and construction of cultural
facilities throughout Serbia. Apart from these projects, in the forthcoming period it will
be very important to invest into the capacity strengthening of the competent
institutions for the implementation of legislative and other regulatory reforms in the
field of culture.
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3.10. Health
Deterioration of health of the population in the Republic of Serbia is a consequence
of a cumulative effect of the critical events in the economy, political and social
impacts that the population has been exposed to during the nineties. Apart from the
said negative effects the following problems also exist: aging of the population, a
great number of refugees and IDPs, pollution of both living and working environment,
unemployment, social poverty, and risky behaviour especially of the young. The
existing system of health care, with its structural weaknesses, poor level of health
education and insufficient efforts to promote health, and point out to risks existing in
the living and working environments, was unable to meet the said challenges.
The system of health care in the Republic of Serbia belongs to the group of
compulsory social/health insurance schemes (the Bismarck model), characterized by
nearly total coverage of the population with health insurance, broad scope of rights
pertaining from the health insurance and a dominantly state ownership of buildings and equipment. The management of the system is highly centralized at the
republican level. The private health sector is not developed.
In spite of its significant share in the GDP, of both the state health sector (6.6%) and
the total expenditures estimated at up 10% of GDP, the system is facing constant
funding problems.
The Republican fund for health insurance is financing the existing structure- i.e. a
well developed network of health institutions employing sufficient and well trained
medical staff. However, access to health services has been limited after the
introduction of financial participation of beneficiaries, particularly for the poor (mainly
for elderly persons, the disabled, the Roma, refugees and internally displaced
persons). This situation has threatened the basic principles of the functioning of the
health care system.
The reform of the health care system was launched in 2002. Health institutions were
given modern equipment and better supply of medicines and other supplies, while
measures for the rationalization of consumption were introduced. Documents for the
promotion of the health care system and health of the population were introduced,
which have created a foundation for the implementation of the reform in this sector:
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Health policy, Vision of the development of the system and Strategy of the reform of
the health care system of the Republic of Serbia were introduced.
In 2004 and 2005 the reform process in the health sector was intensified. The
adoption of the Law on Health Insurance and the Law on Health Care in 2005,
accelerated the reform of the health care system. The reform included a need to
reduce public expenditures (consumption), meaning that the rights based compulsory
insurance had to adapt to the financial abilities of the society. The need to ensure
and improve health care of the population will be met by introducing more rational
and better organized work in this sector. Voluntary health insurance was introduced
for the first time. The introduction of a changed model of financing of primary health
care is underway; while the introduction of a new model of payment for doctors’
services through participation has been started (the expected result is a reduction in
the transfer by the Republican Health Insurance Administration by about 3 billion
dinars).
The main goal of the reform of the health care system is to ensure access to the
necessary services of adequate quality without financial barriers for the whole
population, including socially vulnerable and other categories of population, ethnic
minorities, refugees and internally displaced persons., the Roma, the poor etc. To
this end, numerous national programs and strategies with action plans were adopted,
as well as packages of basic health services, change in the payment to the health
services providers, reduction or exemption from personal participation of insured
persons belonging to vulnerable groups, and integration of private practice in the
public health care system.
The share of the health sector in the implementation of international assistance was
5%.
The projects were implemented in different fields of health activities: improvement of
health care, strategies in fighting different diseases, reform and reconstruction of
health facilities, supply of medicines, development of IT systems and strengthening
of the basic functions of the public health sector. The European Union is funding the
development of the Strategy for the procurement of safe blood and blood products
and the drafting of the Law on Blood Transfusion, as well as projects for the
development of the Strategy for tobacco control and the Public health strategy. Also,
through their projects, the World Bank and the EU are strengthening the capacities of
the Ministry of Health and health institutions with an aim to acquiring knowledge and
skills for introducing a new system of health care.
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Major projects in health care in the period 2000-2005:
1. Procurement of basic medicines and medical equipment for state-owned pharmacies and health institutions in the Republic of Serbia
20,000,000 EUR ЕU 2001
2.Support to the pharmaceutical sector in Serbia 23,700,000 EUR ЕU 2001
3. Reconstruction of hospitals and equipment in hospitals and health centres 5,000,000 EUR ЕU 2001
4. Support to primary health care (Homes of health – local health care centres) 5,370,000 EUR ECHO 2001
5. Support to public health institutes 1,616,000 EUR ECHO 2001
6. Assistance to persons with mental and physical disabilities 1,000,000 EUR ECHO 2001
8. Reorganization of the Institute for blood transfusion 5,000,000 EUR ЕU 2002
9. Upgrading of medical equipment in clinical centres in the Republic of Serbia 11,400,000 ЕUR
Government of Japan 2002
10. Capacity building fund 103,000 USD UNDP 2002-2003
11.EU support to the National blood transfusion service in the Republic of Serbia ЕU 2002-2005
12. Support to public health development in the Republic of Serbia
Euro Health Group 2003-2005
13. CIDA - Monitoring epidemics in the Republic of Serbia Global Fund 2003-2006
14. Promotion of preventive health services in the Republic of Serbia ЕU 2004-2006
15.Development of IT system for basic health and pharmaceutical services ЕU 2004-2007
16.Tuberculosis control through the implementation of directly observed therapy and provision of services to risk groups Global Fund 2006-2007
17. Meta-base of information, communications technologies in health World Bank
18. Equipment for dialysis services 3.5 million euros. Italian Government
19. “Mother and Child” Project 2,500,000 EUR Italian Government
20. Rehabilitation of emergency heath services (ambulances) in Serbian cities and towns
Government of Norway
21. Prevention of narcotics abuse program Government of Norway
Source: Ministry for International Economic Relations
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The engagement of international partners, especially the World Bank and the EU
(through the European Agency for Reconstruction) has imposed a need for
formulating a clear vision of the health care system with leading development
principles. The vision of the health care system is based on a number of significant
premises:
• The health care system will be developed based on the existing capacities and
inherited tradition;
• The solidarity principle will be most important for the adoption of decisions and
the solutions, and it will have to be constantly abided at all levels of health care.
The beneficiaries of the system will have to be in the centre of attention of the
decision makers at the political, administrative and professional levels, and of the
providers of services;
• In ensuring the best possible health care, financial limitations resulting from the
economic abilities of the country should be born in mind;
• Developing a system where both the public and the private sector will take part in
providing health services and which will, within realistic resources, ensure equal
and just access to health services based on modern technology and scientific
methods supported by effective preventive and promotional activities.
The adopted health policy defined the basic goals and directions of the development
of the health system in the Republic of Serbia: preservation and promotion of the
health state of the population; fair and equitable access to health care; placing the
user (patient) in the centre of the system; achieving of financial and institutional
sustainability of the system; improvement of efficiency and quality; defining the role of
the private sector and promoting the human resources base in the health care
system. The basic gaol in health care is to improve the health of the population and
particularly to ensure equal access to health care for all.
The priorities of the health care reform are to reduce preventable morbidity and
premature mortality of the population, to adapt the rights from the health insurance
with material possibilities of the society and to create a modern, sustainable,
decentralized and transparent health care system.
Medium-term reform goals and priorities in the field of health care:
1. Adoption of a health care program for vulnerable categories of the population,
and health care program for the treatment of diseases and disorders of social
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and economic importance and conditions for the implementation of the said
programs;
2. Establishing the system of licensing of health workers and accreditation of
health institutions and programs, as well as the system of permanent
upgrading of the work of health institutions;
3. Ensuring fair and equal access to health care for all citizens, based on a
package of health services, within compulsory health insurance, defined in
the Law on Health Insurance;
4. Defining new models of payment to health services providers, including the
introduction of the capitation model in the primary health care, model of
diagnostically similar groups in hospitals for short hospitalisation and new
models of payment per service for highly sophisticated in tertiary health care;
5. Ensuring resources for a more efficient and quality work of the inspection
services and capacity strengthening of the Ministry of Health.
The priority activities in health insurance and drugs from 2006 to 2010 are as follows:
1) Adoption of by-laws for the establishing of the system of compulsory health
insurance;
2) Reduction of public consumption and harmonization of rights from compulsory
health insurance with the financial abilities of the state;
3) Introduction and implementation of voluntary health insurance;
4) Enactment of the Decree on compulsory health insurance (time-line 2007),
5) Drafting of the Law on the Voluntary Insurance Funds (time-line 2011),
6) Drafting of the new Law on the Production and Sales of Narcotic Drugs;
7) Drafting of relevant regulations for the Law on Precursors;
8) Adoption of a relevant Strategy (second half of 2006);
9) Building of administrative capacities;
10) Signing of international agreements on health insurance;
11) The Ministry of Health has specified all of the above activities in the proposal of
projects (Table 24 a and 24b) which should be implemented in the next three
years with an aim of achieving the goals of the reform of the health care system
in the Republic of Serbia.
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Table 24a Program of reform activities in health care sector for the period 2007-2009 Sources of funding
Project title Institution in charge
Estimated project
value (in EUR)
Own funds
External sources of
funding
Planned start of the project
implementation
1. Elaboration and implementation of the Child and maternity health care programme
Ministry of Health (MH)
705,882 235,294 48 months
2. Early detection and treatment of disorders of the mouth and teeth for children up to 18 years of age and pregnant women
МH 35,294 35,294 12 months
3. Elaboration and implementation of preventive care programme for children with psychological and speech disorders
МH 425,176 220, 000 24 months
4. Health development of young persons in the Balkans
МH 4,912,281 4,912,281 36 months
5. Quality assessment of pre-natal health care in Serbia
МH 95,000 95,000 12 months
6. Introducing one-day surgery in the treatment of gynaecological disorders
МH 200,000 200,000 12 months
7. Implementation of Artificially assisted fertilization programme
МH 352,941 352,941 12 months
8. Improvement of women health in menopause
МH 20,000 20,000 12 months
9. Prevention, early detection and treatment of osteoporosis
МH 296,470 296, 470 36 months
191
10. Planning and implementation of provisions of the Law on health care of the Roma
MH 705, 882 705,882 12 months
11. Developing and implementation of the program of prevention, treatment and rehabilitation of diabetics
МH 2,647,058 2,647,058 12 months
12. Development of program for the prevention, treatment and rehabilitation of persons suffering from cardio-vascular disorders
МH 4,411,765 4,411,765 12 months
13. Development and implementation of program for the prevention, treatment and rehabilitation of persons suffering from chronic obstructive lung diseases
МH 3,529,412 3,529,412 12 months
14. Development and implementation of programme for prevention, treatment and rehabilitation of persons suffering from cerebral-vascular disorders
МH 4,411,765 4,411,765 12 months
15. Development of the programme for the prevention and treatment of malignant diseases (breast cancer)
МH 2,528,894 2,528,894 12 months
16. Development of programme and activity plan of health protection from malignant diseases
МH 6,443,294 6,443,294 12 months
192
17. Implementation of strategy for the promotion of mental health
МH 294,117 294,117 12 months
18. TBC control through a strategy of direct observed therapy
МH 1,382,500 1,382,500
36 months
19. Support to reference laboratories for respiratory diseases and entero-viral infections (influenza, poliomyelitis etc)
МH 83,529 83,529 12 months
20. Implementation of activity plan before and during influenza pandemics
МH 6,918,353 6, 918,353 12 months
21, Implementation of national programmes for the prevention of psychoactive substances abuse
МH 352,941 352, 941 12 months
22. Establishing of the Centre for substation therapy for drug addicts in the local health centre Palilula, Belgrade
МH 200,000 200, 000 18 months
23. Elaboration of guidelines for the production and sales of narcotics and precursors.
МH 34,588 34,588 12 months
24. Founding of a national laboratory for characterization of narcotic drugs, psychotropic substances, precursors and substances not on the list of precursors
МH 197,647 197,647 12 months
25. Tobacco control strategy implementation
МH 2,647,059 2,647,059 12 months
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26. Founding of national centres for organ transplantations
МH 576,760 576,760 12 months
27. Transplantation of basic haematopoiesis cells in children in the Republic of Serbia
МH 2,000,000 2,000,000 12 months
28. Supporting activities for increasing voluntary organ donations for transplantations
МH 80,941 80,941 12 months
29. Development of national registrar of voluntary bone marrow donators and monitoring of laboratory work for HLA type determination
МH 809,820 809,820 12 months
30. Testing chimerism in children after bone marrow transplantations using methods of molecular genetics
МH 11,764 11,764 12 months
31. Encouraging and supporting increase of voluntary blood donations
МH 1,824,353 1,824,353 12 months
32. Promoting health condition of persons suffering from haemophilia
МH 69,929 69,929 12 months
33. Modernisation of plasma fractioning centres
МH 19,015,294 9,411,764 36 months
34. Ionising radiation and health of employees
МH 32,530 32,530 12 months
35. Promotion of preventive health services
МH 3,750,000 3,750,000 24 months
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36. Preventive dentistry health care program
МH 52,941 52,941 12 months
37. Primary health care policy in the Balkans
МH 2,105,263 2,105,263 36 months
38. Testing health state of the population
МH 283,011 283,011 12 months
39. Establishing a central register of anti-rabbis care for persons injured by animals in the territory of RS
МH 58,823 58,823 12 months
40. Development of a national programme and monitoring the prevention, and early detection and treatment of poisoning
МH 148, 235 148, 235 12 months
41. Safe transportation and stocking of radio-active waste
МH 1,356,986 1,356,986 12 months
42. Monitoring and analysing health state of the population based on information from the routine and vital statistics and use o health services
МH 668,612 668,612 12 months
43. Development of health IT system (resources data bank)
МH 978,215 978,215 12 months
44. Monitoring of the quality of work of health institutions and organizations in the implementation of the quality assessment of professional work.
МH 150,684 150,684 12 months
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45. Preparation of the plan of professional development of health workers and associates
МH 1,319,932 1,319,932 12 months
46. Organization and implementation of activities for the promotion of health, particularly of vulnerable groups and local community
МH 1,333,783 1,333,783 12 months
47. Infectious diseases prevention and control including and national immunization programs
МH 1,021,856 1,021,856 12 months
48. Records and monitoring of leading chronic non-infectious diseases
МH 1,007,858 1,007,858 12 months
49. Registration and collection and analysis of data on risk environmental factors threatening health, and proposed measures for improving the situation
МH 321,131 321,131 12 months
50. Supporting activities of professional organizations, councils, associations and humanitarian organizations in priority activities set out in the developmental plan and special health care programmes
МH 62,353 62,353 12 months
51. Founding of the Agency for quality and accreditation of health institutions
МH 1,670,000 1,670,000 24 months
196
52. Fund raising for construction, maintenance of state-owned health institutions
МH 15,247,059 15,247,059 12 months
53. Adoption of the plan for the financing of the procurement of medical equipment for health institutions in the Republic of Serbia
МH 29,113,412 29,113,412 12 months
54. Creating conditions for the work of the republican expert committees for the assessment of health technologies
МH 200,000 200,000 12 months
55. Assessment of health technologies
МH 2,400,000 36 months
56. Strengthening of services of public health laboratories
МH 1,500,000 12 months
57. Developing good practice guidelines – continuation of the project
МH 24,705 24, 705 12 months
58. Emergency health care services reform in the Republic of Serbia, phase 1
МH 300,000 300,000 12 months
59. Restructuring of tertiary health care
МH *
60. 60. Implementation of the Plan for the financing of investment maintenance of Serbian health institutions - NIP
МH 84,000,000 84,000,000 12 months
61. Privatisation of health institutions
МH 988,235 988,235 12 months
197
62. Rationalization of energy consumption in hospitals by introducing cogeneration system through applying positive experiences of the “Energy Efficiency” project
МH 3,427,964 210,576 12 months
63. Promotion of quality of the Centre of chemo-dialysis and gynaecology and paediatrics services in the Republic of Serbia
МH 6,050,000 6,050,000 12 months
64. Promotion of health care for persons suffering of psycho-physiological disorders and speech disorders,
МЗ 92,863 92,863
Kingdom of Norway
12 months
65. Research of death causes and the degree of consent in clinical diagnosis and autopsy findings
МH 47,058 47,058 12 months
66.Funding of applied research in health care
МH 117,647 117,647 12 months
67. Promotion of registering of adverse effects of drugs
МH 117,647 117,647 12 months
68. Promotion of primary health care by introducing capitation model
МH 3,750,000 3,750,000 24 months
69. Reform of the funding system in health through the capitation model and diagnostically similar groups
МH *
198
70. Drafting and implementation of training programs for the MH employees
МH 88,235 88,235 12 months
71. Education of health workers
МH 88,235 88,235 12 months
72. Kingdom of Norway project – Towards a more efficient implementation of reform – promotion of capacities of the Ministry of Health for the development of the action plan
МH 25,000 12 months
73. Developing of the MH portal
МH 7,082 7,082 12 months
74. Education and training of public relations personnel – second phase
МH 23,235 23,235 12 months
75. Developing of procurement plan for the PR offices in health institutions (computers, internet, telephones)
МH 367,.647 367,647 12 months
* Values of the projects should be assessed in cooperation with the competent ministry
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Table 24b Investment activities program in the health sector in the period 2007-2009 Sources of funding
Project name Institution in charge
Estimated project value
(in EUR)
Own funds External sources of
funding
Planned start of the project
implementation
1. Procurement of X-Ray and mammography machines for the Local health centres in Serbia
МH 7,000,000 7,000,000
12 months
2. Urgent reconstruction of health institutions in Serbia
МH 12,336,471 12,336,471 9 months
Projects supported by the international partners will help accelerate the reform of the
health care system: the World Bank, the European Union through the European
Agency for Reconstruction, UNICEF, the Canadian International Development
Agency (CIDA), and a number of bilateral donors– Norway, China, and Japan being
the most important. The projects are directed to the promotion of primary health care,
reconstruction of general hospitals, equipping of health institutions, providing
equipment of health institutions, reform of the health insurance funding, promotion of
drugs management policy, development of basic health services packages,
introduction of new models of payment of health workers - primarily introduction of
capitation and development of an integrated IT system in health care.
3.11. Science and Environmental Protection
Science
Although there are sufficient professionals in the field of scientific research, this area
is insufficiently technically equipped to be able to achieve competitive results on a
European level. This is a consequence of the poor condition of existing equipment,
which has become obsolete in the past 15 years and become the biggest limiting
factor for development. In Serbia it is hindering the implementation of the policy of
integrated research, one of the mid-term economic priorities of the European
partnership, implemented through the Framework Programmes for Research,
Development and Demonstration Activities of the European Union. There is also a
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serious slowdown in innovation development fiel, hence in economic development
and creation of new jobs based on them, thereby also investment of the economy in
research and development and achievement of the EU’s Lisbon objective of 3% of
the GDP being invested in R&D. Taking into consideration the burden the state
budget suffers from the need to resolve numerous social, ecological and other
problems amassed in the transition period, international aid is truly a key resource of
improving the situation in this area by helping to renew scientific research hardware
and capacities.
The Law on Scientific Research and the Law on Innovation sets up the strategic
legislative framework for reforming the scientific research and development of
innovations by rationalising the network of scientific research organisations,
harmonising scientific research standards with those extant in the EU and world-
wide, improving the conditions in which scientific research and development of
innovations operate, and by increasing the effectiveness of investments in these
activities and of the applicability of their results in the economy. Research and
development will have a key role as the prime moving force of broad economic,
social and cultural change in the process of building up a society based on
knowledge. Given that the results of scientific research activities are directly tied with
and directly proportional to the all-round development of society, the necessary
preconditions and environment will be created for scientific research and higher
education to become the engine of economic and social development.
The Ministry of Science and Environmental Protection (MSEP) initiated on January 1,
2006 a new scientific research cycle (2006–10), which includes the following
activities and goals: monitoring set measurable criteria for assessing the scientific
research competency of researchers, drafting efficiency analyses of the application of
scientific research results in the economy, productively engaging all available
scientific research resources, especially young researchers, controlling the efficient
utilisation of budget funds in R&D activities, improving the conditions in which
scientific research activities take place (equipment levels in scientific research
organisations, material status of researchers etc.), developing international scientific
research co-operation and increasing GDP outlay for R&D. In the field of international
co-operation, emphasis will be placed on bringing Serbia into the 7th EU Framework
Programme for Research and Development (2007-13), for which donor funds are
needed to assist national participation in the Programme. Much attention will also be
paid to multi-lateral programmes which industrialised European countries are
opening for south-eastern Europe and the western Balkan countries. Also planned is
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adoption of criteria for establishing the proficiency of scientific researchers, which
includes bringing more young researchers into scientific research activities so as to
ensure their continuous scientific development. Accordingly, a National Programme
for the Development of Scientific Expert Personnel will be adopted. An important
objective of the Government and the MSEP is the development of an optical
academic network and local computer networks, acquisition of computer hardware
for scientific research organisations and similar activities as prerequisites for the
development of an information society. The Greek Government’s SEELight project,
part of the Hellenic Plan, would make possible long-term safe and rapid access of the
Serbian academic network to the GÉANT European academic network. Another of
the priorities in the forthcoming period is promotion of domestic publishing activities
in the area of scientific research, both through programmed financial support and by
establishing world standards aimed at promoting the utilisation and impact of
scientific research activities on the domestic and international planes.
Protection from ionising radiation and nuclear safety is an inter-sectoral field which
includes problems covered by the ministries in charge of science, environmental
protection, health, interior and defence. Given that the Republic of Serbia lacks
sufficient funds to sufficiently respond the needs of protection from ionising radiation
and nuclear safety and security, this priority must also be included in the international
aid requirements. International assistance will be directed towards the
implementation of the new Law on Protection from Ionising Radiation and Nuclear
Safety, and the establishment of an Agency for Protection from Ionising Radiation
and Nuclear Safety, an independent regulatory body covering this field. This new law,
together with related secondary legislation, will incorporate in the Serbian legal
system all provisions emerging from international conventions, International Atomic
Energy Agency (IAEA) recommendations and EU directives.
A major problem of nuclear safety and security in Serbia remains the depleted
nuclear fuel in the research reactor of the Vinča Nuclear Sciences Institute. The IAEA
is involved in the project of repatriating the fuel from Vinča to the Russian Federation
as that agency’s biggest active endeavour in its programme of technical assistance
to its member countries. The IAEA, the Vinča Institute and a consortium of three
Russian companies have signed a contract on repackaging (4.3 million USD coming
from donors) and transporting (5.4 million USD still not secured) the fuel to Russia.
Another 19.5 million USD will be needed in phase three – reprocessing fuel on its
arrival in Russia. Some 20% of the overall value (24.9 million USD) is provided by the
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U.S. Department of Energy, and about 20 million USD thus remains to be secured
from donor funds.
IT sector in the Republic of Serbia is still in its infancy. Like in many other areas,
there is a lack of precise and published statistical data to provide a preliminary
statistical profile and other indicators for the IT sector.. Development of information
society (IS) is in direct correlation to the promotion of democracy, economy, efficient
state administration and other social areas of key importance for the welfare of the
people and their quality of life. Promoting the development of the IS also helps bridge
the gap between the transition countries and the industrialised world and is a step on
the way to membership in the EU. The MSEP’s Draft National Strategy for the
Information Society is now in the final stage of the process of adoption by the
Government. The Strategy defines goals, procedures and subjects of the
implementation of e-initiatives in all segments of social and economic life. The
strategic objectives, coordinated by the MSEP, include the following: electronic
government, health care, education, science and financial institution, all with the aim
of making possible access to those institutions through the public communication
networks. These aims could be realised by relying on the developmental potentials of
the scientific research organisations, and would be preceded by the reorganisation of
the institutions, as well as measures to promote and implement the services. The
realisation of the Strategy’s aims requires, besides the limited state budget funds,
also considerable international assistance.
An important part of reforming scientific institutions is drafting standardised
documents for establishing clear operational procedures of the Ministry of Science
and Environmental protection (MSEP) as part of the reform of the state
administration. Better organisation of operational processes requires the
standardisation of documents, as a key factor of success in the application of IT and
communication technologies in complex systems. Given that e-government is an
extremely extensive and complex system, implementation of standards is of vital
importance for its successful development and introduction.
Given that modern social and economic development is based primarily on the
implementation of the results of R&D activities in economic area, it is necessary to
consider scientific research and development as the main resources of development.
Accordingly, it is necessary to increase investment in the development of the R&D
systems in the Republic of Serbia from the current 0.5% of the GDP to a figure of
1.0%. Achieving this will not be possible without extensive international aid, especially in
view of efforts to reach the declared EU Lisbon objective of 3% of GDP in R&D.
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The following table shows high-priority projects and programmes identified by the
MSEP which should contribute to the realisation of the goals set out above in the field
of science.
Table 25. High-priority reform projects and programmes in the area of science in the 2007-2009 period.
Sources of funding Project name Institution in
charge Est. project value (EUR) Own
funds External sources
Planned start of project
implementation1. SEELight --
linking computer networks of several SE European countries
Belgrade University computer centre
8,500,000 1,600,000
2. International Atomic Energy Agency projects
MSEP 23,100,000 3,150,000 IAEA 2006
3. Belgrade University microscope centre
B.U. Faculties of Physics, Chemistry and Physical Chemistry
2,000,000
4. Support to national GRID infrastructure – AEGIS
Institute for Physics, Belgrade
2,150,000
5. „Center for Nanomaterials reinforcement”
Belgrade University 1,900,000
6. Proton radiation eye therapy in Serbia
Laboratory for Physics, Vinča Institute for Nuclear Sciences
1,825,000
7. Physical security system project, Vinča Institute for Nuclear Sciences
Vinča Institute for Nuclear Sciences
1,000,000
8. Investments in major scientific development equipment
17,000,000 NIP 2006
9. Funding realisation of up to 50 innovations per annum
2,500,000 NIP 2006
10. Helping construction of innovation organisations – from idea to final product or service (R&D centres)
NIP
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11. Helping construction of organisations for infrastructural support for innovation organisations (Science and Technology parks and commercial and technology incubators)
7,500,000 2,500,000 NIP 5,000,000 2006
12. Helping formation of data bases (latest scientific developments world-wide and in Serbia, library materials, promotion of science)
7,900,000 NIP 2006
In co-operation with the MSEP, it is also necessary to formulate projects and
programmes in the following high-priority areas:
• renewal of the R&D infrastructure and outfitting science and technology parks;
• protection form ionising radiation, nuclear safety and security;
• establishment of a National Council, accreditation committees and other scientific
research bodies;
• defining measurable criteria for assessing the scientific research proficiency of
researchers;
• drafting studies on the efficiency of the application of scientific research results in
the economy;
• financially upgrading the Fund for Innovation Activities and creating the necessary
conditions for recovering funds to the Fund;
• developing scientific data bases to provide sources of relevant information needed
to upgrade scientific research work;
• establishing centralised registers of scientific research organisations, scientists,
scientific research equipment etc;
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• establishing an Information Society Forum as an independent regulatory body
in charge of the efficient functioning of the information society in Serbia;
• drafting a data base on the IT potential and indicators of knowledge in IT, not
only at a level of scientific research organisations but also the IT potential of
the entire Republic of Serbia;
• establishing a unified register of national internet domain;
• systematised approach to the selection, development and implementation of
standards in all MSEP sub-systems which should be a part of the integrated
e-administration system;
• educating people on E-business
• establishing a system which would include a national accreditation body, a
supervisory body and other certifying bodies in electronic business operation.
Environmental Protection
The biggest ecological problems in the Republic of Serbia lie in air pollution, water
pollution, declining water resources and inappropriate waste management. Air
pollution accounts for some 55% of all the overall costs of environmental protection,
followed by water pollution (22%) and waste management (11%).
Air quality in Serbia suffers from emissions of СО2, NОx, CО, soot, powdery materials
discharged by thermo-electric power plants (burning lignite and with poor soot
management) and industrial facilities. Air quality deteriorates particularly on windless
days and during the heating season, especially caused by using low-grade fuels.
Particularly troubling is high sulphur and lead air pollution caused by poor motor fuel
(leaded petrol and diesel fuel with a high sulphur content). When the Agreement on
the Energy Community was signed in 2005, the Republic of Serbia began
incorporating environmental protection into other sectoral policies. A national register
of greenhouse gas emissions, which is technically a list of ozone-layer-depleting
substances, is still in the phase of preparation. The existing legislation on emissions
and immisions is being harmonised with EU regulations, while the incomplete
monitoring results in an unrealistic image on the level of environmental pollution in
the Republic of Serbia. A Draft Law on Air Protection has been completed.
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The overall quality of drinking water in the Republic of Serbia is unsatisfactory. Some
60% of the population of the Republic of Serbia have access to water-supply
systems; antiquated networks and a lack of rationalisation incentives result in
excessive exploitation of this important resource. Some 33% of the population of the
Republic of Serbia are connected to sewage systems. The country’s biggest cities –
Belgrade, Novi Sad and Niš – have no waste water-treatment facilities. Almost 90%
of all waste water in the industry is discharged without any treatment. A Draft Law on
Financing Water Management has been prepared, while the Law on Waters is in
preparation; standards for the quality of discharged waste waters are still lacking.
Land quality is affected badly by the uncontrolled and inappropriate use of industrial
fertilizers and pesticides, and the lack of control of water used for irrigation. The
widespread use of leaded motor fuel pollutes soil alongside the main roads. Poor
management of waste materials and chemicals cause degradation of land.
The Environmental Protection Office has listed the following as its priorities:
• waste management,
• management of chemicals and protection from accidents,
• air quality and climate change,
• protection of nature, bio-diversity, soil protection,
• noise protection,
• protection from ionising and non-ionising radiations.
Some 60 % to 70% of all solid household wastes are collected in the Republic of
Serbia. The disposal sites do not meet technical standards for waste dumps. No
reliable data exist on the quantities of hazardous wastes generated by industry. An
estimated 460,000 tonnes of hazardous industrial and medical waste are generated
in the Republic of Serbia every year. There are no facilities for treating and disposing
of hazardous waste; much of it is stored temporarily at inappropriate sites, some of
which have existed for several decades. Every year some six to seven million tonnes
of flying ash from TE power plants is dumped at inappropriate storage sites. The
amount of waste generated per unit industrial product is excessively high,
exploitation of raw materials is uneconomical and energy efficiency is low. A Draft
Law on Waste Management has been completed and a Law on Packaging and
Packaging Waste is being prepared. The National Strategy for Waste Management,
adopted in 2003, is being implemented at a certain rate.
207
The Government has initiated a reform in the area of environmental protection by
drafting and adopting several relevant strategic documents: the Draft National
Environmental Protection Programme (NEPP) and National Waste Management
Strategy (NWMS) with a programme of harmonising with EU regulations. The
institutional framework has been reinforced by the strengthening of the following
institutions: the Directorate for Environmental Protection, the Environmental
Protection Fund and the Agency for Environmental Protection, upgrading whose
capacities is a priority in the coming period. The legislative framework is in placed,
with adoption of system laws in 2004, and a number of laws dealing with individual
issues, which are being prepared.
Several reform objectives have been achieved with international support and
assistance. Most of the projects helped upgrade human, material and technical
capacities in the area of environmental protection, and some were directed straight
towards the control and reduction of pollution. The following list presents an overview
of the most important projects in the 2001-2006 period.
The most important environmental protection projects of the Ministry of Science and Environmental Protection in the 2001-2006 period: 1. Development of environmental protection legislation in the Republic of Serbia
the Government of Finland
2,000,000 EUR 2002 – 2005
2. Support for the development of environmental protection legislation and relevant institutions in the Republic of Serbia
SDC, the German, Italian and Norwegian governments, OSCE, SIDA, WВ, SC, EBRD
3. Upgrading capacities for management in the field of environmental protection in the Directorate for Environmental Protection 7,000,000 MSEK, SIDA, 2004-2007
4. Danube River Industrial Pollution Reduction (DRIPR) – feasibility study costs
350,000 USD, WB-GEF
2003-2009
5. Development of National Strategy and Action Plan for the problem of Greenhouse Gases in Serbia Japan Special Fund 2004-2005
8. GEF National Plan for the Implementation of the Stockholm Convention (POP)
GEF, UNEP
349,300 USD 2005 – present
9. Biodiversity Preservation Strategy, Action Plan and National Report 319.970 USD, GEF On-going
10. National Programme for Final Withdrawal from the CFC – Multilateral Fund for Implementation of the Montreal Protocol
Multilateral Fund for Implementation of the Montreal Protocol
2,600,000 USD 2005-2007
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11. Pilot-project, Pančevo: ”Monitoring the Environment and Sustainable Change of the Activity of Certain Industrial Complexes”.
the Government of Italy
2,000,000 USD
On-going
In line with the most important measures to promote the development and
preservation of the environment, a high priority is the establishment of regulatory and
economic mechanisms for the realisation of the concept of sustainable economic
development. This should follow on indirectly from national priorities in the policies of
environmental protection in accordance with the aims and instruments of the National
Programme. Under the Law on Environmental Protection, Action plans will be drafted
for the following fields: upgrading regional planning and landscape management;
protection of land; protection of water; protection of air and the atmosphere;
protection of forests; eco-system protection; protected natural resources; waste
management; management of chemicals; protection from ionising and non-ionising
radiation; accident protection; protection from noise and vibration; sustainable energy
management; information system development; development of scientific research
and education; development and implementation of economic instruments, etc. The
National Programme will be implemented through the action plans, which will define
concrete measures, exponents and funds.
The 2007-2009 period should encompass practical and financially acceptable
reforms that can be implemented immediately, in particular regulatory reforms,
whose aim is harmonisation with the EU acquis for the environment. The measures’
objectives are aimed at upgrading the legislative framework, development of sectoral
strategies and investment plans, improvement of the monitoring system and raising
public awareness. Institutional competences must be defined clearly in the new
regulations in order to clear up existing overlaps and inconsistencies. The key
institutional priorities are building the capacities of the Ministry for Science and
Environmental Protection, the Agency for Environmental Protection and the
Environmental Protection Fund.
Besides these regulatory reforms, it is also necessary to work on reducing pollution
of the air, land, ground and underground waters by the energy and transport sectors
and the industry. Accordingly, financial and other assets should be directed towards
endangered locations and priority areas, such as air pollution by large industrial
complexes and TE power plants, treatment of waste water released by large
industrial plants, treatment of urban waste water in large towns etc. In the process of
privatisation of the economy it is necessary to develop mechanisms for resolving
inherited pollution problems and damage inflicted to the environment. The resolution
209
must be based on the 'polluter pays’ principle. It is also necessary to promote
competition and involve the private sector in providing services, especially in the
waste and water management sectors.
The above mentioned activities, in respect of regulatory measures and reduction of
pollution, should be implemented in the following environmental fields:
• the quality of water and water resources,
• waste management,
• management of chemicals and accident protection,
• the quality of air and climate changes,
• protection of nature, biodiversity and forests,
• protection of land,
• protection from noise,
• protection from ionising and non-ionising radiation.
An estimate of the costs for the implementation of NEPP in the forthcoming period is
made up of the overall implementation costs calculated on the basis of the costs of
individual measures and an estimate of the funds needed to implement the aims and
reform of the mid-term policies, based on projected data and comparative costs
incurred in the central European countries. The overall NEPP costs will include
expenditure for institutions that deals with environmental protection, as well as the
costs for monitoring system and operating costs of the infrastructure in the field of
environmental protection (collecting and disposing of waste, collecting and treating
waste water etc.). The percentage of the overall costs for the NEPP will depend on
the annual rate of economic growth recorded in the Republic of Serbia. Experiences
of the new EU members from central Europe indicate that their expenditure for
environmental issues in the pre-EU period were 1.5%-2.5% of the GDPs. Taking this
into consideration, as well as the average economic growth rate, it is expected that
the share of the GDP of the Republic of Serbia for this purpose will reach 1.4% in the
mid-term. The key precondition for achieving this goal will be contribution of EU funds
as well as other donors in funding the system of environmental protection in the
Republic of Serbia.
Total environmental protection investments within the NEPP are expected to grow
from an initial figure of 26 million EUR per annum to 667 million EUR in 2012. In the
2007-2009 period the increase will be gradual, the reason being orientation towards
210
building up an efficient legal and financial system, as well as a system of monitoring
and reporting on environmental protection where activities are not capital-intensive.
The estimate is that the energy and mining sector will account for the largest share of
the overall NEPP expenditure with 26%, followed by water resources management
(15%) and transport (costs connected directly to environmental issues, 9%).
Transport costs indirectly linked with environmental protection (improving public
transport, new beltways, etc.) account for 22% of the overall NEPP costs. The
biggest projects in the waste-management sector will probably be the construction of
sanitary landfills (estimated 14.5 million EUR per annum). Over two million EUR a
year is needed to upgrade existing dumps, and over one million EUR for
management of medical waste. Given the limited funds available in the budget of the
Republic of Serbia, achieving these objectives will not be possible without extensive
international assistance and support,
The tables which follow show high-priority projects and plans identified by the MSEP
which are within the purview of the ministry and which should contribute to the
achievement of the environmental protection objectives listed above.
Table 26a. High-priority reform projects and programmes of the MSEP in the area of environmental protection in the 2007-2009 period
Sources of funding Project name Institution in
charge Est. project value (EUR) Own funds External
sources
Planned start of project
implementation
1. Drafting and adoption of regional plans for waste management for 10 regions
MSEP 750,000 Budget Donors 2007
2. Drafting secondary legislation under Law on Chemicals
MSEP 900,000 Donors 2006-2009
3. Forming and updating data base of chemicals on the market and their properties, including data base of hazardous materials
MSEP, Ministry of Agriculture,
Forestry and Water
Management, SEPA
* Budget Donors 2006-2009
211
4. Revision of existing methodology for forming register of air polluters
MSEP, SEPA 50,000 Donors 2007
5. Developing national capacity for protection and sustainable use of bio-diversity in accordance with inter-national obligations and drafting Action Plan for developing capacity
MSEP 180,000 Budget Donors 2007
6. Development of plans, programmes and foundations for sustainable use of individual natural resources
MSEP, Institute for
the Protection of
Nature
* Budget Donors 2007-2009
7. Assessment of threats to biodiversity components according to agreed criteria and indicators.
Institute for the
Protection of Nature,
Belgrade University Faculty of Biology, Forestry Institute
500,000 Donors 2007-2008
212
8. Consideration of existing standards (WHO, Directive for Sewer Sludge 86/278/EEC, Dutch of British standards) and development of corresponding standards for the Republic of Serbia with regard to the chief polluters and sources and pollution. (harmonisation of national soil protection legislation with EU regulations)
Ministry of Agriculture,
Forestry and Water
Management, Land Institute
* Budget Donors 2006
9. Development of information system on data on noise
SEPA, MSEP 130,000 Budget Donors 2006-2007
10. Development of data base on sources of ion-ising radiation in accordance with the IAEA’s RAIS Programme
MSEP * Budget 2006-2007
11. Drafting data base of radioactive sources
MSEP * Budget 2007
12. Development of national strategy for cleaner production standards
MSEP * Budget Donors 2006
13. Publication of technical standards (BREF) for certain industrial sectors.
Ministry of Energy and
Mining, Ministry of
the Economy, industry
100,000 Donors 2007
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Table 26b. High-priority capital investment projects and programmes of the MSEP in the area of environmental protection in the 2007-2009 period
Sources of funding Project name Institution in
charge Est. project
value (EUR)
Own funds External sources
Planned start of project
implementation
1. Equipping laboratories for control of chemicals
MSEP, SEPA, laboratories
2,000,000 Budget, laboratories
Donors 2007-2009
2. Developing and outfitting accident response teams
MSEP 2,000,000 (400,000
already secured)
Budget Donors 2006-2009
3. Development of data base of register of air polluters, as part of the integrated register
MSEP, SEPA 250,000 Budget Donors 2007-2008
4. Modernisation of existing data collection equipment in 15 biggest towns, upgrading existing monitoring network, improving existing ambient air monitoring laboratories
MSEP, municipalities,
Republican Hydro-
Meteorological Bureau
2,600,000 Donors 2006-2009
5. Development of concept of establishing a national mechanism of promotion of technical and scientific co-operation in the area of sustainable use of components of biodiversity (Clearing House Mechanism).
MSEP 12,000 Donors 2006
6. Installation of measuring equipment and software for on-line measure-ments (in the municipalities with the highest noise levels, in accordance with Directive 2002/49/ЕC)
MSEP, municipalities
300,000 Municipalities Donors 2007-2009
214
7. Decontamination of the land contaminated by depleted uranium in the Reljana area
MSEP 400,000 Budget Donors 2006
8. Establishment of pilot UV radiation monitoring station
MSEP 70,000 Budget Donors 2009
9. Pilot project: Introduction of integrated prevention and control of environmental pollution permit in a selected enterprise.
MSEP 100,000 Donors 2007
10. Construction of 10 regional waste landfills
MSEP 50,000,000 Budget 2006-2009
* It is necessary to estimate the value of the projects and the structure of the sources of funding, in co-operation with the competent ministry and institutions
Besides the above projects and programmes, in co-operation with the MSEP it is also
necessary to formulate projects and programmes in the following high-priority areas:
• development and adoption of Action Plans for the realisation of the National
Environmental Protection Programme;
• capacity building of the unit for planning and management of projects and
strengthening capacities for planning and managing projects;
• strengthening administrative capacities in the area of industrial pollution;
• increasing energy efficiency and efficiency of utilisation of raw materials in the
industry and reducing generation of waste;
• Developing of unique register of National internet domein;
• Systemetic approach in selection, development and implementation of standards in
all sub-systems of MSEP which has to become a part of E-government system as a
whole;
• Public awareness and education in E-business.
• Establishment of National Acreditation Body, National Supervison Body and other
sertification bodies in the field of E-business.
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3.12. Internal Affairs
Reforming the police is a high-priority task in the EU accession process in the coming
period. The reform is aimed at achieving a high level of security of person and
property from all possible threats and maintaining stable law and order and a
favourable security situation in the Republic of Serbia. Accordingly, the reform covers
upgrading cost-effectiveness of the entire service, its modernisation, establishment of
an efficient, flexible and economic police educational system intended to train police
personnel at all levels and of all job descriptions for the duration of their service. It is
also necessary to continue upgrading mechanisms of internal control, legality,
professionalism and accountability of all Ministry of Internal Affairs (MIA) personnel,
and providing requisite assistance and co-operation in developing external,
parliamentary supervision of the work of the police.
The following are high-priority strategic tasks of the MIA, harmonised with European
Partnership requirements:
• combating organised crime in all its forms, particularly in the area of financial
crime,
• efficiently combating the most serious forms of crime, preventing attempts to
destabilise security in southern Serbia,
• assuming control of the national frontiers according to the planned dynamics and
establishing a fully-integrated border-control system,
• reinforcing internal control and establishing external supervision, upgrading
capacities criminal investigation capacities by modernising technology,
• modernising IT and communication hardware in order to speed up the exercise of
citizens’ rights (realisation of ID document projects, TETRA, AFIS, FiS and
others),
• developing the police education system, as well as institutional development of the
MIA and implementation of comprehensive reforms of the Ministry.
For the purpose of achieving these aims has been adopted the Law on the Police,
which is founded on the highest standards set in EU documents and in line with the
reform objective that the police should become a public service. The basic principles
of the initiated reform of the police have been built into the Law, which regulates
specific issues in connection with police personnel and other MIA employees, as their
216
status, responsibilities, rights and duties differ from those of other state officials, as
well as other questions in connection with the control of the work of the police,
funding, co-operation in the performance of police business, auxiliary police and
other issues.
A Law on the Protection of Participants in Criminal Proceedings has also been
adopted, and a special MIA unit (Protection Unit) formed thereunder; a Programme of
Protecting Participants in Criminal Proceedings is also being realised under the Law.
In the preceding period important reform objectives in this area have been achieved
with international support and assistance. Most of the projects implemented dealt
with upgrading professional, material and technical capacities of the MIA, such as
development of border-control capacities, IT equipment and various types of
education and training. The following list contains an overview of the most important
projects in the 2001-2006 period.
The most important Ministry of Internal Affairs projects in the 2001-2006 period:
1. Integrated border management, Horgoš
EUR 5,000,000 European Commission 2001
2. IT equipment for the Serbian MIA 1,879,073 Germany 2005
3. Police work based on security of citizens in 2004 410,000 United Kingdom 2003
4. Reforms and support to the internal affairs sector 1,610,879 Switzerland 2002
5. Border crossing infrastructure Batrovci (2002 budget) 4,000,000 European Commission 2001
6. Border crossing infrastructure Horgos – phase 2 (2002 budget) 5,000,000 European Commission 2002
7. Control of light weapons in Serbia and Montenegro 585,000 UNDP 2002
8. Foundation of planned immigration management service 1,286,278 Italy 2005
9. Support to the rule of law and creating necessary conditions for good-quality court prosecutions and crime scene investigations in the Republic of Serbia 12,430,000 Sweden 2002
10. CARDS 2003 support to the MIA 12,000,000 European Commission 2002
11. CARDS 2004 support to the MIA 1,000,000 European Commission 2003
217
12. Capacity building of the Border Crossing Committee and rehabilitation of border crossings CARDS 2004 6,000,000 European Commission 2004
13. Management of Information Improvement Project (MIIP) – Norwegian bilateral assistance 2004 1,688,630 Norway 2004
14. Trainers for coaching civilian police 540,000 Canada 2005
15. Internal affairs CARDS 2005 – Strenghthening the capacities of law enforcement agencies European Commission 2001
16. Construction of reception centre for asylum seekers 200,000 European Commission 2005
17. Support for the MIA – Border Police Department – CARDS 2005 3,000,000 European Commission 2007
18. Support for the MIA – Border Police Department – CARDS 2006 3,000,000 European Commission 2007
19. Development of criminal intelligence analytics of the border police services of Serbia and Montenegro 132,746.87
Great Britain and OSCE project 2005
20. Upgrading capacities of border police 76.895.16 Italy and OSCE project 2005.
21. Upgrading MIA capacities in the fight against human trafficking – equipment procurement phase 65,266.21 Norway and OSCE project 2005
22. Forensic training for border police personnel on use of Docubox and identification of stolen vehicles 8,630 OSCE 2006
23. Support in technical equipment for MIA – special teams for fighting against trafficking in human beings 110,000$ United States 2003
24. Support for MIA – Border Police Department – in CMIS software and equipment, for upgrading criminal intelligence capacities 54,000 Great Britain 2006
25. Support for MIA – Border Police Department – in I2 software, for upgrading criminal intelligence capacities 5,000 Great Britain 2004
26. Support to MIA – Border Police Department – for developing capacities for approving humanitarian stay to foreign citizens who are victims of trafficking in human beings 30,000
International Organisation for Migrations 2004
27. Support to MIA – Department for Foreigners in the Belgrade Regional Bureau – for upgrading capacities to
10,000 Great Britain 2004
218
combat trafficking in human beings
28. Support to MIA – Units for Combating Trafficking in Human Beings – in equipment 10,000 United States
29. Support to MIA – Units for Combating Trafficking in Human Beings – in vehicles 160,000$ United States 2005
30. Management of Information Improvement Project (MIIP), phase 1, Procurement of hardware and software for upgrading financial and accounting operations 882,000
Government of the Kingdom of Norway 2006
Realisation of the reform requires continuation of activities on improving legislation
on which the Ministry’s work is based, in particular laws on supervision of the national
frontier, on foreigners, on asylum, on protection of personal data, on confidentiality of
data, on the personal ID card, on permanent and temporary residence, on the
personal ID number. Activities in progress which need to be completed include
establishment of the border control system and development of secondary legislation
based on the Law on the Police which will regulate this subject matter in detail and
make possible the full realisation of the police reform. As regards control of the
border, the border with Hungary is now completely under police control (a Regional
Centre has been formed in Subotica and six border police stations opened), while on
the Romanian border the process is in its final phase; full police control of the rest of
the national frontier is expected by the end of 2007 (in keeping with the Dynamic
Plan of Transferring Control of the National Frontier from the Border Units of the
Army of Serbia and Montenegro and the MIA of the Republic of Serbia). The
Government has approved the Strategy of Integrated Management of the Border of
the Republic of Serbia, and the Action Plan for the implementation of that Strategy.
The Strategy is a document whereby the Republic of Serbia defines policies in
connection with the establishment of a system of integrated border management, the
framework for drafting corresponding synchronised sectoral strategies and plans of
implementation, and the roles and responsibilities of state agencies, identifies
strategic goals and defines basic activities in the process of establishing and
maintaining long-term sustainability and stability of the established system of
integrated border management. The Strategy is based on the National Strategy of
Serbia for Accession to the European Union and the on-going reform processes in
the country, in particular those listed in the European Partnership document. Sources
of good practice and standards which exist in this area that were also used include
219
Directives of the European Commission on integrated border management for the
western Balkan countries, the Schengen catalogue, the Schengen legal heritage, and
international conventions on human rights and the rights of asylum-seekers and
refugees.
The following table contains a list of high-priority projects and programmes identified
by the Ministry of Internal Affairs which should contribute to the realisation of the
goals set out above.
Table 27. High-priority projects and programmes of the Ministry of Internal Affairs in the 2007-
2009 period Sources of funding
Project name Institution in charge
Est. project value (EUR) Own
funds External sources
Planned start of project
implementation
1. Management Information Improvement Project (MIIP), Financial Management of the Ministry of Interior - MIIP Phase 2 Procurement of hardware and software for improvement of operations, building maintenance and vehicle use
General Services Department
953,734 Govt. of the Kingdom of
Norway 2007
2. Improvement of Management Information Project (MIIP), Phase3, Procurement of hardware and software for upgrading personnel operations
General Services Department
*
3. MIIP, Phase 4, Procurement of hardware and software to upgrade general services and housing affairs
General Services Department
*
220
4. Contribution to improvement of traffic safety on Corridor-X routes in Serbia by upgrading detection and documentation of traffic violations (Phase 1)
Traffic Police Department 650,000
2007
(Phase 1)
5. Contribution to improvement of traffic safety on Corridor-X routes in Serbia by upgrading detection and documentation of traffic violations (Phase 2)
Traffic Police Department 650,000
2008
(Phase 2)
6. Improving traffic police equipment standards and procedures for processing traffic accidents and their harmonisation with EU standards and procedures.
Traffic Police Department 1,500,000 NIP
Realisation begun in 2006, to be completed
in 2007
7. Contribution of traffic police to the fight against terrorism – through Corridor 10
Traffic Police Department 500,000
2007
(Phase 1)
8. Contribution of traffic police to the fight against terrorism – through Corridor 10
Traffic Police Department 500,000
2008
(Phase 2)
9. Outfitting two police helicopters for prevention and detection of terrorist activities through road traffic control
Traffic Police Department 680,000 2007
221
10. Improving analytical data bases on traffic and traffic accidents in accordance with European standards
Traffic Police Department 300,000 2007
11. Speed-management strategy on national roads with the aim of reducing accident rates and consequences
Traffic Police Department 460,000
2007
(phase 1: research and
drafting project)
12. Speed-management strategy on national roads with the aim of reducing accident rates and consequences
Traffic Police Department 3,000,000
2008
(phase 2: equipment
procurement)
13. Speed-management strategy on national roads with the aim of reducing accident rates and consequences
Traffic Police Department 140,000
2009
(phase 3: evaluation)
14. Prevention campaigns directed at particular-risk groups (alcohol, narcotics, excessive speed)
Traffic Police Department 300,000 2008
15. Contribution by traffic police to the fight against trafficking in human beings
Traffic Police Department 1,000,000 2008
222
16. Prevention campaigns directed at vulnerable groups (children, pedestrians, cyclists, scooter users)
Traffic Police Department 400,000
2009
17. Development of programme system for monitoring the work of traffic police
Traffic Police Department 300,000 2009
18. Upgrading technical capacities and outfitting units for conventional surveillance
Criminal Police Department 900,000 450,000 2007
19. Establishment of covert surveillance unit
Criminal Police Department 1,500,000 500,000
20. Upgrading technical capacities and outfitting with assets for application of special investigative techniques and special techniques of proving criminal offences
Criminal Police Department 2,000,000 - 2007
223
21. Development of methodology and technical capacities for recording investigatory activities, statements of suspects, witnesses and protected witnesses, as well as transfer, keeping, processing and procedural use of materials, in accord-ance with new provisions of the Criminal Procedure Law.
Criminal Police Department 2,000,000 265,000 2007
22. Upgrading capacities for working with informers in the fight against organised crime in the Republic of Serbia
Criminal Police Department 72,520 OSCE 2007
23. Support for the capacities of the criminal intelligence services in Serbia
Criminal Police Department 442,000 UNDOC
April 2006: realisation not
yet begun
24. Upgrading existing capacities of the National Criminology Technical Centre
Criminal Police Department 600,000
25. Establishment of forensic toxicology lab
Criminal Police Department 150,000
26. Establishment of forensic phonetic lab
Criminal Police Department 150,000
27. Procuring and equipping special crime-scene investigation vehicles
Criminal Police Department 1,000,000
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28. IT equipment for the criminology technical line
Criminal Police Department 200,000
29. Upgrading observation and recording capacities in the fight against international organised crime in Serbia
Criminal Police Department 252,088 OSCE 2006-2007
30. PACO Serbia, project for combating economic crime in the Republic of Serbia
Criminal Police Department European
Union
31. Project for the establishment of a criminal intelligence system in the MIA of the Republic of Serbia
Criminal Police Department 3,300,000
SIDA, Swedish
International Development
Agency
2005-2008
32. Project for a digital telephone network designed according to the TETRA standard
Liaison and Communication Security Department
85,000,000
(At least Phase II
should be realised,
worth about 25,000,000)
Phase I realised
with budget funds in
2005-2006 20,000,000
2005-
33. Project for a telecommunications transport network
Liaison and Communication Security Department
9,000,000 600,000
(from the Budget)
2004-
34. Project for procurement of a network of local telephone networks
Liaison and Communication Security Department
3,000,000 300,000
(from the Budget)
2007
225
35. Procurement of funds for implementing pro-gramme of protection of witnesses in criminal proceedings needed to fund the Protection Unit and the Commission for Implementing the Protection Programme
Ministry of Finance
MIA 5,300,000 2006
36. Development of National Strategy of Protection and Rescue in Emergency Situations
Government, (МIA, Ministry of Capital Investment [MCI], Ministry of Agriculture, Ministry of Health, MSEP)
2007
37. Drafting basic laws in the area of protection and rescue in emergency situations
MIA Sector for Protection and Rescue (Office of the Minister, Department for Systemic-Legal Affairs), local governments, NGOs, insurance firms, professional organisations and associations
2007
38. Drafting study for integrated assessment of threats and vulnerability of facilities and land from natural disasters, fire and technological threats in the production, storage, transport and use of hazardous and harmful materials
MIA Sector for Protection and Rescue, MSEP, MCI, Ministry of Agriculture, Ministry of Health, Ministry of Culture, Ministry of Trade, companies which produce, use and transport hazardous materials and other enterprises of interest to the Republic, local governments
1,000,000 2007
226
39. Development of plans of action in emergency situations
MIA Sector for Protection and Rescue, MSEP, MCI, Ministry of Agriculture, Ministry of Health, Ministry of Culture, Ministry of Trade, companies which produce, use and transport hazardous materials and other enterprises of interest to the Republic, local governments
500,000 2007
40. Organising professional services which are active in emergency situations
Local governments, paramilitary police, special ops units, MIA helicopter unit, sports associations (scuba divers, mountaineers, cavers, parachutists etc.), the Red Cross, the Serbian Army, fire-fighting and rescue units in enterprises, hydro-meteorological organisations, , seismological bureaus, amateur radio clubs
5,000,000 2007
41. Equipping fire-fighting and rescue units and building and renovating accommodation facilities for them
The Government, local self-administration organs, professional services active in emergencies, equipment manufacturers, professional associations
50,000,000 2007
227
42. Establishing and equipping training centres for fire-fighting and rescue units and civil defence personnel
MIA Sector for Protection and Rescue, professional services active in emergencies, local self-administration organs
2,500,000 2007
43. Foreign language training
MIA Sector for Protection and Rescue, language schools
100,000 2007
44. Encouraging the activity of citizens, NGOs and non-profit organisations
Sector for Protection and Rescue, MIA, industrial and territorial voluntary fire brigades and their associations, sports clubs and their associations (scuba divers, mountaineers, cavers, parachutists, amateur radio clubs etc.), the army
1,000,000 2007
45. Education and training of rescue personnel for providing paramedic assistance
MIA Sector for Protection and Rescue, Ministry of Health, medical educational institutions
100,000 2007
46. Updating training programmes in educational institutions for personnel active in emergency situations and other schools and faculties
Sector for Protection and Rescue, MIA, Education Department, MIA, MPS, professional associations of teaching staff, voluntary fire brigades and associations
100,000 2007
47. Reconstruction and modernisation of existing centres for providing information and establishment of a national centre in Belgrade
IT Department *
2007
228
48. Electronic personalisation of travel documents
IT Department 5,000,000 2007
49. Establishment of an Infodesk for users of MIA information technologies and systems
IT Department 3,000,000 2007
50. Development of a system of verification, authentication and issue of visas at border crossings of the Serbia
IT Department and Ministry of Foreign Affairs
* 2008
51. Project for developing an information system for automatic monitoring of moving objects and establishment of spatial infrastructure in the Serbian MIA
IT Department 1,500,000
500,000
1,000,000
2008
52. Project for developing an information system for controlling crossings and security of the Serbian national frontier
IT Department 1,000,000 2007
53. Project for developing a national asylum system - Phase I, preliminary study and normative documents
IT Department 130,000 2007
Phase I
54. Project for developing a national asylum system - Phase II – development of asylum information system
IT Department 250,000 2008
Phase II
229
55. Project for developing a national asylum system - Phase III – equipping and training personnel
IT Department 300,000 2008
Phase III
56. Project for developing an information system for monitoring illegal migration
IT Department 250,000
2007
57. Upgrading IT communication infrastructure with the aim of preventing terrorism
IT Department 1,500,000
2007
58. Project for securing critical IT technology Phase I – feasibility study
IT Department 100,000
2007
Phase I
59. Project for securing critical IT technology Phase II – planning and establishing resource basis for project realisation
IT Department 4,000,000
2008
Phase II
60. Project for securing critical IT technology Phase III
IT Department 5,000,000 2009
Phase III
61. Project for technical modernisation (procurement of hardware and software for modernising regional Internal Control centres)
Police Internal Control Sector 2007
62. Educational programmes for upgrading systemic training and advanced training in the field of Internal Control affairs
Police Internal Control Sector 2007
230
63. Preventive campaigns directed towards the fight against corruption, organised crime and torture
Police Internal Control Sector 2007
64. Project for consolidating and equipping Internal Control and internal grievances procedures
Police Internal Control Sector 2007
65. Introducing high standards for border police
Border Police Department 10,000,000 2008
66. Refurbishment of premises and procurement of prefabricated accommodation units
Border Police Department 12,900,000
12,900,000
NIP 2007
67. Procurement and installation of telecommunication system for border police and Customs on Bulgarian border
Border Police Department 17,000
17,000
NIP 2007
68. Equipping border police with vehicles, IT hardware and communication equipment
Border Police Department 3,200,000 3,200,000 2007
69. Taking over control of border from Army units - equipping border police with vehicles, IT hardware and communication equipment
Border Police Department 3,205,000
3,205,000
NIP 2007
231
70. Taking over control of border from Army units - construction and improvement of infrastructure for border police use
Border Police Department 12,900,000
12,900,000
NIP 2008
71. Development of criminal intelligence capacities of border police
MIA-Border Police Department
500,000 2007
72. Development of early-warning system
Border Police Department 100,000 2007
* The value of project and the financing structure need to be assessed in co-operation with the competent ministry and institutions
Besides the above-mentioned projects and programmes, it is also necessary to
formulate, in co-operation with the MIA, projects and programmes pertaining to police
co-operation with customs and inspectorial services, the prosecution service and
other bodies involved in the process of controlling border crossings and border
security. It is also necessary to carry out an organisational reform of the Border
Police Department by establishing regional centres (besides the central and local
centres), as has already been done on the borders with Hungary and partially also
Romania.
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3.13. Capital Investment
Transport
One of the most important preconditions for successful economic development in
Serbia is restructuring the entire transport sector into a modern, safe and functional
system. A satisfactory traffic infrastructure is an important factor of the efficiency of
the entire transport system, but also a key precondition for a sustainable economic
and social development of the Republic of Serbia and its integration into the EU. It is
also an important promoter of regional development and the utilization of the
comparative advantages of local areas by linking the touristic and the agricultural
zones with the economic centres.
The Republic of Serbia, with its geographical position, situated on the crossing of
traffic Corridors VII and X, provides the shortest and most rational transit routes
between the central and western European countries and southern Europe and the
Middle and Far East. In the final report of the High Level Group32, founded under the
aegis of the European Commission, five main multimodal axes were identified as
extensions of the Trans-European Transport Network (TEN-T) towards neighbouring
countries and regions. Project proposals on Corridor X (road and rail), Corridor VII,
and the Multimodal Platform of Metropolitan Belgrade have been incorporated within
the South-East Multimodal Axis. Based on the 2003 Regional Balkans Infrastructure
Study (REBIS), on June 11, 2004 the western Balkan countries signed in
Luxembourg a Memorandum of Understanding on the Development of the South-
East Europe Core Regional Transport Network, whose aim is developing
infrastructure and improving policies in the area of transport and which anticipates
close co-operation between participants in the process of harmonising procedures
and technical standards, regulatory and administrative provisions concerning
transport, in accordance with EU standards and directives. For the purpose of
implementing the Memorandum of Understanding, the South-East Europe Transport
Observatory (SEETO) was formed with permanent Secretariat located in Belgrade.
The first Multi Annual Development Plan of the South-East Europe Core Regional
32 Report from the High Level Group chaired by Loyola de Palacio, Networks for peace and development – Extension of the major trans-European transport axes to the neighboring countries and regions, November 2005
233
Transport Network was adopted in April 2006 and defines long-term investment
requirements for the western Balkan countries in the period 2006-2010.
In reference to the European Transport Policy for 201033, the Serbian Government is
looking forward to improving road and rail infrastructure in the Republic of Serbia,
with financial assistance from the EU, and to establishing the necessary conditions
for unhindered inland navigation, particularly on the rivers Danube and Sava.
Accordingly, study, project and tender documentation will be prepared in connection
with a number of projects for modernising the traffic network in the Republic of
Serbia, including removing and eliminating bottlenecks on the pan-European Corridor VII, as the most important waterway, reconstruction and increasing capacity of the
railway Corridor X, and boosting capacity of the road Corridor X. The priority will be
construction of a highway connecting Belgrade and the southern Adriatic Sea and
reconstruction of the Belgrade-Bar rail line. A feasibility study for a motorway
connecting Pancevo with Timisoara in Romania is planned as well.
The transport development strategy in the Republic of Serbia should be based on the
concept of (ecologically, technically, financially and operationally) sustainable and
multimodal approach to development, implying integrated planning of the
development the transport system and more economical utilisation of all modes of
transport.
Certain important reform goals in the area of transport have already been met with
international assistance and support. Most of the projects implemented concerned
road and rail transport, primarily through concession loans, as well as assistance in
performing feasibility studies, etc. Other projects realised included strengthening
institutional and human capacities of the Ministry for Capital Investment, and those
aimed at restructuring public enterprises in the field of transport. The following table
provides an overview of the most important projects in the 2001-2006 period.
The most important transport sector projects in the 2001-2006 period: 1. Railways Rehabilitation project loan
70,000,000 EUR
Eur. Investment bank (EIB) Completed
2. Yugoslav railways - Belgrade ZTP reconstruction project 2,600,000
USD Canada Completed
33 White Paper - "European transport policy for 2010 : time to decide" (COM 370/2001)
234
3. Procurement of 93 buses for the public transport enterprise - GSP Belgrade 15,200,000
USD Japan Completed
4. Reconstruction of Niš Airport (2002) 2,550,000
EUR Norway Completed
5. Reconstruction of Niš Airport (2003) 13,500,000
NOK Norway Completed
6. Twinning project between Serbian Road Directorate and Swedish Road Authority 14,000,000
SEK Sweden On-going
7. Loan for European Roads B project 120,000,000
EUR EIB On-going
8. Loan for modernising and upgrading air traffic control system 33,500,000
EUR
European bank for
Reconstruction and Development
(EBRD)
On-going
9. Loan for Roads and Bridges Rehabilitation – B1 project 33,000,000
EUR EIB Loan signed May 2006
10. Loan for Belgrade Urban Renewal project 90,000,000
EUR EIB On-going
11. Loan for road reconstruction project in Serbia 76,000,000
EUR EBRD On-going
12. Loan for ZTP Belgrade Reconstruction Project 57,000,000
EUR EBRD On-going
13. Loan for Urgent road rehabilitation project 50,000,000
EUR EIB On-going
14. Loan for Roads rehabilitation project in the Republic of Serbia 95,000,000
EUR EIB On-going
15. Loan for Air traffic control infrastructural rehabilitation project 34,000,000
EUR EIB On-going
16. Support for road public enterprise ”Roads of Serbia”
1,300,000
EUR
European Commission
CARDS 2004 On-going
17. Support to the Transport Sector Reform 14,000,000
EUR
European Commission
CARDS 2005 On-going
18. Transport rehabilitation project 55,000,000
USD World Bank On-going
19. Rehabilitation of a priority interchange on the Belgrade to Montenegro road 4,500,000
EUR
European Commission
CARDS 2004 On-going
20. Feasibility study for Loznica – Novi Sad highway 1,200,000
EUR
European Commission
CARDS 2004 On-going
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21. Feasibility study for section of road from Belgrade to the Montenegro border
1,500,000 EUR
European Commission
CARDS 2003 ?
22. Feasibility study for Belgrade ring road 1,000,000
EUR
European Commission
CARDS 2003 Completed
23. Master Plan for Inland Waterway Transport in the Republic of Serbia 2,000,000
EUR
European Commission
CARDS 2003 Completed
24. Reconstruction of ‘Sloboda’ bridge - Novi Sad
40,000,000 EUR
European Commission
CARDS 2002 Completed
25. Integrated Socio-economic Development Plan Based on the Rehabilitation of the Middle Danube River Basin and Inland Waterway System of Serbia
1,000.000 EUR
European Commission
CARDS 2004 On-going
26. Capacity-building of Ministry for Capital Investments and other competent institutions
3,000,000 EUR
European Commission
CARDS 2004 On-going
27. Twinning project - harmonisation of legislation with acquis communitaire 1,500,000
EUR
European Commission
CARDS 2006 On-going
28. Modernisation of railways traffic in Railways’ ZTP Belgrade sector 1,720,000
CHF Switzerland On-going
29. IMOD X - Inter-modal solutions for competitive transport in the Republic of Serbia
372,000 EUR Norway Final phase
30. Drafting strategy of development of PPP model for road construction in the Republic of Serbia
260,000 EUR Canada Final phase
Road transport –The Republic of Serbia has a relatively well developed network of
roads, both as regards density of roads and total roadway area, compared with
central and eastern European countries. The road network consists of 5,525 km of
trunk roads (380 km of dual-carriageway roads and 170 km of semi-motorway),
11,540 km of regional roads covered by the JP Putevi Srbije public enterprise and
another 23,780 km of local roads upkept by local governments. Some 96.4% of all
trunk roads and 79.4% of regional roads are paved. Some 2,150 km of Serbia’s road
network is part of the Е-75, Е-70 and Е-80 international routes, which make up part
of the Pan-European Transport Corridor X. The two immediate priorities are the
construction of motorways linking Horgoš with Požega and Niš with Dimitrovgrad,
and construction of the Belgrade bypass and bridges at Beška and Ostružnica. For
the purpose of obtaining new foreign credits and granting concessions will be
proposed and promoted sections of Corridor X, as well as the conclusion of
agreements on public private partnerships.
236
Railway transport – The Republic of Serbia has a railway network of 3,809
kilometres, 7.2% of which is double-track. The throughput capacity is sufficient, but
the railways lag behind European standards in respect of electrification, length of
double-track routes, maximum allowable speeds and maximum axle loadings, all of
which calls for modernisation. The poor condition of track and permanent way has
led to speed restrictions of 20-40 kph on a total of 162 km of track, or over 4% of the
total network. Just 32.7% of the network is electrified. The rolling stock is very
technologically outdated and in poor condition, in short supply and with a high
percentage out of service at any given time. Reorganisation of railway transport
based on the new Law on Railways maintains state ownership of the infrastructure,
while organisation of traffic and its control will be adapted and prepared for future
competition. Work on technical and technological modernisation of the railway
infrastructure will continue in the next three years, in particular on Corridor X, as well
as the upgrading of rolling stock. Accordingly, the Government’s main task is railway
electrification, which will contribute to better and more stable operation of the
railways (The Railway Rehabilitation Project I funded by the EBRD and Railway
Rehabilitation Project II). For these purposes will be used international financial
organisation funds in an amount of 140,000,000 EUR: 60 million for rolling stock and
80 million for railway infrastructure.
River transport – There are a total of 1,419 kilometres of navigable waterways in the
Republic of Serbia. The river Danube (Corridor VII) is navigable along 588 km in
Serbia and is a strategic traffic link which should help boost development of trade,
tourism and services. The Danube accounts for some 85% of all cargo transported
by ship in Serbia. Some 207 km of the river Sava is navigable in the Republic of
Serbia, and some 41 km of the river Tamiš, for vessels displacing up to 150 tonnes.
The Danube-Tisa-Danube system is a multi-purpose water-management network
made up of a total of 12 navigable canals in the Bačka and Banat regions in
Vojvodina providing a link between the Danube and Tisa rivers and the Rhein-Main-
Danube river navigation system. In the past decade river navigation has been
affected by NATO bombing and inadequate maintenance of waterways. Restoration
of unhindered and safe navigation in Serbia would contribute to the advancement of
regional co-operation and development and the possibility of linking the river Sava
with the Danube trunk route and thereby to the rest of the European inland waterway
system. Development of a modern River Information Service would intensify the
exchange of geographical data and establish closer co-operation between countries
in managing the Danube waterway.
237
Air traffic – The Republic of Serbia has three airports qualified for passenger
transport – Belgrade, Niš and Priština. There are intentions to upgrade three military
airfields – Ponikve (Užice), Ladjevci (Kraljevo) and Sombor – to full civil aviation
standards. Belgrade’s Nikola Tesla International Airport is owned by the Republic of
Serbia. Given that it satisfies navigational and spatial requirements, Belgrade airport
has a tendency to develop as a regional air traffic centre. Its infrastructure and
equipment are fully operational, but lacking as regards capacity. The airport aspires
to secure the position of an important transit centre, especially in cargo transport; for
this purpose it needs a second runway, a business centre, a hotel, an office building
and other facilities. JAT Airways, the national air carrier, is operating in a diminished
and economically weak market, has surplus capacities and labour, an organisational
structure poorly adapted to contemporary conditions and an oversized and outdated
fleet, and is still burdened by debts, and is therefore forced to work on winning for
itself a niche in international air transport from a completely new starting position.
The most important requirement for achieving competitiveness would be a fleet
renewal.
Multi-modal transport – The development of multi-modal transport in the Republic of
Serbia is in its infancy. Development of inter-modal transport terminals is a
precondition for the development of modern transport and distribution technologies.
There is no fully-developed inter-modal transport terminal in the Republic of Serbia,
only ZIT Beograd (a subsidiary of Serbian Railways) and the Port of Belgrade being
equipped to handle standard container transport. In the forthcoming period adequate
attention will be focused on upgrading the institutional framework and drafting studies
on support to this form of transport. Conditions will be created to boost the presence
of combined railway-road-river transport. The ratified AGTC agreement (European
Agreement on Important International Combined Transport Lines and Related
Installations) makes possible a systemic approach to the reconstruction, construction
and modernisation of railways of the highest international importance, terminals for
combined transport, border crossings and other infrastructure. The agreement
reflects a commitment to the development of combined transport, creating the
necessary preconditions for attracting international financial organisations in respect
of loans and donations in the area of transport infrastructure and related facilities.
The Government is planning to intensify in the period ahead the process of
restructuring public enterprises – ЈAТ Airways, Belgrade Airport, PTT Srbija, Serbian
Railways – in which the pre-privatisation stage has been completed. Taking into
238
consideration the high social and other cost of restructuring, international assistance
will be very important in this endeavour.
Speeding up reforms in the transport sector will not be possible without the
assistance of international organisations and bilateral donors. Several important
projects have already been realised with international assistance or with the help of
initiatives of international organisations, including: reconstruction of the ‘Sloboda’
bridge in Novi Sad (European Agency for Reconstruction), reconstruction of the
railway bridge between Erdut and Bogojevo, with the help of donations from the
Governments of the Kingdom of Belgium and the Kingdom of Norway; bilateral
agreements on railway and combined transport with the Republic of Bulgaria and the
Republic of Croatia; multilateral agreements on railway and combined transport.
The following table presents high-priority projects and programmes identified by the
Ministry for Capital Investment (MCI) which should contribute to the realisation of the
goals set out above in the transport sector.
Table 28. High-priority projects and programmes in the transport sector for the 2007-2009 period
Sources of funding
Project name Institution in charge
Est. project value (EUR)
Own funds External sources
Planned start of project
implementation
1. Supervision – construction of Belgrade bypass “Sector 0, Batajnica – Dobanovci” and traffic interchange
Public road
enterprise “Roads of
Serbia”
1,500,000 CARDS 2006 2007-2008
2. Supervision – construction of Belgrade bypass “Sector Ostružnica - Bubanj Potok”
Public road
enterprise “Roads of
Serbia”
1.500,000 CARDS 2006 2007-2008
3. Supervision – reconstruction of the “Gazela” bridge and Е75 section: Nikola Tesla Airport – Bubanj Potok
Public road
enterprise “Roads of
Serbia”
2,000,000 CARDS 2006
2007-2008
239
4. General project of motorway section Bubanj Potok – Vinča – Pančevo – Banatsko Novo Selo
MCI 1,000,000 NIP
1,000,000 - 2006-2007
5. General project of Danube bridge at Vinča
MCI 1,000,000 NIP
1,000,000 - 2006-2007
6. Intelligent Transport Systems (ITS) – Master Plan
MCI 2,000,000 2007-2008
7. Supervision – Žeželj bridge – reconstruction
MCI 2,000,000 2008
8. Project of analysis of condition of railways in Serbia
Serbian Railways 3,000,000 2008
9. Dredging river Danube with river-bed construction works – preparation of:
a. project documentation
b. tender documentation
c. supervision
MCI
1,500,000
1,500,000
2,000,000
2007-2008
10. Supervision – River Information System – RIS
MCI 2,000,000 2007-2008
11. Supervision – Removal of World War II sunken vessels at Djerdap 2 Sector
MCI 1,500,000 2007-2008
12. Supervision – Revitalisation of Navigation locks at Djerdap 1 and at Djerdap 2
MCI 2,000,000 2007-2008
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13. Winter harbours on the Danube – project documentation
MCI 2,000,000 2009
14. Institutional building of inter-modal transport in the MCI
MCI 2,000,000 2007-2008
15. TA – Establishment of Project Implementation Unit – PIU – railways
Serbian Railways 1.500,000 2007-2008
16. TA – Establishment of Project Implementation Unit – PIU – roads
Public road
enterprise “Roads of
Serbia”
2,000,000 2007-2008
17. Capacity building – Strategy of developing PPP model for all modes of traffic infrastructure
MCI 1,000,000 2008
18. Twinning project – standardisation in the construction sector, B.U. Faculty of Civil Engineering
2,000,000 2007-2008
19. Twinning project – Technical standards in road and railway sector
MCI 2,000,000 2007-2009
20. Study – develop-ment of railway transport in the Republic of Serbia
MCI 3,000,000 2008
241
21. STRATIMOD – Strategy of developing terminals for inter-modal transport and logistics centres (continuation of IMOD X project)
MCI 400,000 2007
22. Feasibility study establishment of market oriented relation of combined transport between Austria and the Republic of Serbia
MCI 500,000 2007
23. Study of develop-ment of road network in the Republic of Serbia
MCI 2,000,000 2008
24. Construction of section of Belgrade bypass “Sector 0, Batajnica – Dobanovci” and traffic interchange
Public road
enterprise “Roads of
Serbia”
110,000,000
-
EIB-55,000,000
EBRD-55,000,000
2007-2008
25. Construction of section of Belgrade bypass “Sector Ostružnica – Orlovača – Бubanj Potok”
Public road
enterprise “Roads of
Serbia”
180,000,000 NIP
30,000,000
IFI34
150,000,000 2007-2008
26. Reconstruction of Е75 route ‘Zmaj –Gazela’ and ‘Gazela - Bubanj Potok’ sections
Public road
enterprise “Roads of
Serbia”
40,000,000
IFI 40,000,000
2007-2008
27. Reconstruction of Gazela bridge
Public road
enterprise “Roads of
Serbia”
32,500,000 7,500,000
City of Belgrade
25,000,000
EIB
2007-2008
34 International financial institutions
242
28. Construction of southern sector of Corridor X:
- Leskovac-Mace-donia border, E-75
- Niš-Dimitrovgrad, E-80
MCI
- 470,000,000
- 450,000,000
NIP
(98,000,000 for2006/2007)
Hellenic Plan
100,000,000 2006-2009
29. Modernisation of border crossings (Ribarci, Gradina, Batrovci, Preševo and crossings on Romanian border)
MCI 10,500,000 NIP
6,000,000
Credit - IFI
4.500,000 2006-2007
30. Žeželj bridge – reconstruction35
MCI 35,000,000
10% City of Novi Sad
50% IFI
40% grant 2007-2008
31. Dredging Danube river bed
MCI 40,000,000 50% IFI
50% grant 2007-2008
32. River Information Service – RIS
MCI 25,000,000 50% IFI
50% grant 2007-2008
33. Removal of World War II sunken vessels at Djerdap 2 Sector
MCI 20,000,000 50% IFI
50% grant 2007-2008
34. Revitalisation of Navigation locks at Djerdap 1 and at Djerdap 2
MCI 62.200,000 50% IFI
50% grant 2007-2008
35. Reconstruction of Ostružnica railway bridge with approach ramps
MCI 2.500,000 NIP
2.500,000 - 2006-2007
35 Infrastructural projects of improving navigation conditions on the Danube (Corridor VII) will partly be funded through credits, while it is planned to secure the rest of the money from EU funds (about 50% of the project's value).
243
EBRD
60,000,000 loan signed
2006 36. Loan for Railway Rehabilitation project II
Serbian Railways 160,000,000 20,000,000
EIB
80,000,000
Signing procedure in
progress
37. Reconstruction of rail infrastructure to UIC-C profile standard on (Bar)-Vrbnica-Belgrade-Vršac-Romanian border railway
Serbian Raiways 3,000,000 2007-2009
38. Reducing train stoppage times at railway border crossings on trans-European corridors
Serbian Railways 29,000,000 IFI 2008-2009
39. Adaptation of Ponikve regional airport:
- Mine clearance
- Construction, modernisation
MCI 1,465,000 NIP
1.465,000 - 2006-2007
40. Modernisation of ‘Konstantin veliki’ Airport, Niš
MCI - -
2007-2009 Identified in
SEETO Plan for 2007-11 period
41. Functional upgrading of air-space at ‘Nikola Tesla’ Airport, Belgrade
MCI 7,000,000
2007-2009 Identified in
SEETO Plan for 2007-11 period
* it is necessary to assess the values of the projects and structure of sources of funding, in co-operation with competent ministries and other institutions.
244
Telecommunications
The Republic of Serbia together with Macedonia were the last two south-east
European countries to begin deregulation of the telecommunications market. It was
also the last to establish a regulatory body, the Telecommunications Agency, which
became operational in 2006; the first results of its functioning are still to be seen (the
Law on Telecommunications was adopted in 2003 and provided for full deregulation
and the formation of a regulatory body).
Existing problems in the fixed telephony sector in the Republic of Serbia are best
seen in the large number of twinned lines, insufficient penetration and low rate of
digitalisation, as well as the small number of broadband internet connections (cable
and ADSL). Around 700 million EUR has been invested since 2001 in the
development and construction of the fixed network, considerably improving the
situation in that network over that five years ago; since then about 600,000 new
connection have been activated, increasing the capacity of the fixed network by
some 28%. The overall digitalisation rate in the Republic of Serbia is about 84%, and
telephony penetration over 36%. The Republic of Serbia now has about 2,700,000
subscribers. Dial-up access to the internet is predominant, mainly via the SMIN
network (Serbian Multiservice Internet Network) of Telekom Srbija a.d., used by all
ISPs in Serbia. In its network Telekom Srbija a.d. has sufficient capacity to enable
broadband ADSL access via end-user modems; there are now over 20,000 ADSL
subscribers in the three biggest cities. Development of the cable network is extremely
dynamic, with about half a million subscribers at this moment. There are two large TV
and internet cable providers, PTT and SBB, and a number of smaller ones; but this
area is still not fully regulated in Serbia and requires quite a lot of legislative effort.
Another unregulated area in the Republic of Serbia is VoIP (Voice over Internet
Protocol).
In order to overcome these problems is necessary to gradually liberalise the
telecommunications market for all participants, improve the quality of services and
protection of users, move the regulatory function from the state to the independent
regulatory body legally and functionally free from the influence of the state and other
interest groups - operators, (the Republican Telecommunications Agency, the
independent regulatory body, became operational on August 28, 2005), link
telecommunications systems with those of other countries, perform efficient
allocation, management and control of operating frequencies, in accordance with the
245
Law on the Issue of Broadcasting Permits, and increase use of ICT as a motivator of
development which requires high-quality education of human resources.
For the realisation of those goals the Government plans to adopt a
Telecommunications Development Strategy whose aim is a medium-term
liberalisation of the telecommunications market for all participants, improvement of
the quality of services and protection of users. The Telecommunications
Development Strategy and Broadcasting Development Strategy, interlinked and
harmonised with the other development strategies, and adjustment of the legislative
and regulatory frameworks determined by the Law on Telecommunications and the
Law on Broadcasting, represent the foundation for speedier development of the
telecommunications services market and development of the telecommunications
infrastructure. International support was not primarily focused in the previous period
on the telecommunications sector, and was focused in particular on legislative
development, such as assistance in drafting the Law on Telecommunications.
In order to increase the share of telecommunications services in the GDP and
upgrade the universal service, it is necessary, in co-operation with the Ministry of
Capital Investments36, to formulate projects and programmes in the following high-
priority areas:
• Building the institutional capacities of the Republican Agency for
Telecommunications – provision of resources needed to ensure the autonomy
and professionalism of the regulatory authority
• Higher efficiency in the development and adoption of spatial and urban
development plans and updating cadastre to create the necessary conditions for
the construction of telecommunications facilities, particularly infrastructural, in
accordance with the Law on Planning and Construction.
• Simplification of regulations and laws on the construction of telecommunications
facilities. Where permits have been issued for the construction of other facilities
(water supplies, natural gas, sewers, central heating supply, access roads), the
investor should also have an obligation to lay conduits for telecommunications
cables whose ownership would be retained by local authorities.
• Encouraging the development of the Information Society by implementing е-
government, е-education, е-learning, е-business, е-banking and е-health.
Implementation of e-government should stimulate better coordination and 36 The Ministry of Capital Investments has not submited high-priority programmes and projects in the area of telecommunications in the 2007-2009 period.
246
efficiency of the Government – local self-administration and local self-
administration – citizen linkage;
• Supporting regional expansion of the telecommunications industry and operators
active on the territory of the Republic of Serbia;
• Involvement of research & development centres in the development
programmes of leading world manufacturers;
• Creating all necessary preconditions to secure provision of universal service by
the end of 2009, which includes its definition, and the establishment of a fund for
its implementation;
• Establishment of an educational network and linking it with the Academic
Network of Serbia;
• Realisation of a broadband intranet for the state administration;
• Embracement of a modern enumeration plan and its implementation;
• Continuous adaptation and adjustment of the broadcasting spectrum allocation
and use plan in accordance with requirements and technological developments.
Urban and spatial planning and housing policy
The Law on the Spatial Plan of the Republic of Serbia with the Spatial Plan of the
Republic of Serbia - SPRS (Official Gazette of the RS, No. 13/96) is still a strategic
development framework. Although it needs changes, primarily in connection with
changing land exhaustion circumstances and changes which have taken place in the
environment, the SPRS continues to be a valid and feasible framework for guiding
the urban development process, development and construction of towns and
suburban settlements, as well as the traffic network on the national level.
The strategic objective in the area of urban and spatial planning is the achievement
of a sustainable urban and spatial development of the Republic of Serbia
247
Medium-term objectives in the area of urban and spatial planning call for:
1. Increasing responsibility in the area of spatial planning and development
2. Increasing efficiency in managing, using, protecting and developing space, as well
as stimulating territorially balanced development of the Republic of Serbia while
preserving the quality and diversity of available natural and man-made resources
3. providing efficient, high-quality, inexpensive and reliable services for individual
citizens in areas within the purview of the MCI
4. institutional strengthening and raising professional capacities of civil servants
In co-operation with the U.N. Economic Commission for Europe – Committee for
Human Settlements, a Country Profile on the Housing Sector of Serbia and
Montenegro has been drafted, published and available on the UNECE website. This
document was the basis for the Draft Study of the Housing Sector of the Republic of
Serbia, currently in the harmonisation phase with other competent ministries and
expected to be forwarded to the Government by the end of May 2007. The study’s
recommendations are a basis for adopting a National Housing Policy, a strategic
developmental document for the housing sector which has not existed so far. Based
on the Draft Law on Social Housing, work will begin in the second half of this year on
developing a National Social Housing Strategy which provides strategic directives for
the area of social housing, a part of the public interest whose aim is social
sustainability of the community. Certain elements of the strategic housing framework
are also contained in the Poverty-Reduction Strategy – the First Report on the
Implementation of the Poverty-Reduction Strategy in Serbia, and the Memorandum
on the Budget and Economic and Fiscal Policy for 2006.
The strategic objective in the area of housing is to secure the social sustainability of
the community by clearly defining protection of the public interest in the area of
housing in the Republic of Serbia.
Medium-term goals in the area of housing are:
1. Upgrading legislation in the area of housing policy, especially social housing;
2. Increasing efficiency in the management, exploitation and maintenance of the
existing housing;
3. Institutional strengthening in the housing sector at the central level and raising
professional standards in this area
248
4. Support for institutional strengthening of local self-administrations in the
housing area to help increase housing construction and resolving the problem
of inappropriate forms of housing
5. Advancement of the system of planning and managing building land in order
to secure sites for affordable housing construction and prevention of unlawful
building activities.
The following table presents high-priority projects and programmes identified by the
Ministry for Capital Investments (MCI) which should contribute to the realisation of
the aims set out above in the area of urban and spatial planning in the 2007-2009
period.
Table 29. High-priority MCI programmes and projects in urban and spatial planning in the 2007-2009 period
Sources of funding
Project name Institution in charge
Est. project value (EUR)
Own funds
External funding
Planned start of project
implementation
1. Drafting Spatial Development Strategy of Republic of Serbia
Rep. Agency for Spatial Planning (RASP)/
MCI
*
2. Drafting new Law on Planning and Construction
MCI *
3. Establishment of information system on space urban areas in Serbia
RASP/
MCI *
4. Establishment of urban indicators MCI *
5. Drafting regional spatial plans for the Republic of Serbia
RASP/
MCI *
6. Forming Republican Agency for Housing and local housing agencies in the major towns and at municipality level
MCI *
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7. Drafting study of the housing sector in the Republic of Serbia
MCI *
8. Drafting national housing policy document
MCI *
9. Drafting national social housing strategy
MCI *
10. Drafting new law on managing and maintenance of residential buildings
MCI *
11. Building up institutional capacities to improve quality of life in the suburbs of Krnjača and Borča in the Palilula Municipality, Belgrade City
MCI *
12. Creating institutional capacities to improve quality of housing in the poorest Roma settlements in the Kraljevo Municipality
MCI *
13. Programme of repairing and rebuilding housing in the Kolubara Region damaged in the 1998 earthquake
MCI *
14. Programme of compensating people for damage sustained in the 1999 NATO bombing.
MCI *
15. Construction of housing for people hit by flooding in 2005.
MCI *
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16. Assessment of damage and construction and repairs in areas hit by 2006 landslides.
MCI *
17. Construction of 70 houses for internally dis-placed persons in the Gračanica Municipality area
MCI *
18. Formulating programme of building 1,200 homes for socially threatened Roma populations within the Action Plan for Improving Roma Housing
MCI *
* it is necessary to assess the values of the projects and structure of sources of funding, in co-operation with competent ministries and other institutions
3.14. Justice
There is an urgent need to implement strategic reforms at all levels of the judicial
system with the aim of establishing the rule of law ad legal security in the Republic of
Serbia. The need for the reform comes form the serious conflict between the
outdated political and legal system based on the 1990 Constitution and the new
social relations, founded on totally different principles and values. It is no longer
possible to keep adopting modern legislation so as to make compensation for
outdated principles of the old Constitution, under which has been created a deficient
judicial system open to improper influence. Working in such conditions has led to a
decline in the reputation of the judiciary as a state institution. All of the above means
that property and other rights which are essential for the normal functioning of the
economy and the existence of trust in the institutions of society continue to be poorly
protected.
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In the past four years analytical work has uncovered the following weaknesses:
• An inadequate constitutional and legal framework, resulting in an excessive
duration of court procedures, problems in the enforcement of decisions, a lack of
accountability of the judiciary, and even corruption;
• An excessively complex and expansive system of courts, costing more than
necessary and reducing the efficiency of access to justice;
• Unclear standards of electing, removing and promoting judges, and of assessing
their performance, resulting in inequalities in the efficiency of courts and reduction
of public confidence in the judicial profession;
• The absence of capacities for integrated planning, definition of budgets and
measurement of results, all reducing the ability of the judiciary to monitor
performance and improve it in an efficient manner;
• Outdated organisation of the court administration, preventing efficient dispensation
of justice and processing of court cases;
• The heavy burden of administrative business on behalf of judges which reduces
their efficiency as well as their morale;
• Lack of continuous training for judges and other court officers, which is an obstacle
to the development of a modern and fully professionalized personnel well trained
for management and judicial administration;
• Inappropriate university law school programmes, reducing the competency of future
leaders in the legal and judicial professions;
• Poorly equipped and maintained court buildings, reducing access to justice and
putting great pressure on resources in the judiciary;
• An overpopulated and antiquated system of penal sanctions institutions, which is
neither conducive to rehabilitation nor does it fulfil international standards;
• Insufficient utilisation of IT and automated systems, leading to constant utilisation of
inefficient and labour-intensive practices.
In order to rectify the weaknesses identified above, the Government has embraced a
set of reforms aimed at achieving a more efficient, modern and adequate judiciary
system. Accordingly, a National Judicial Reform Strategy has been adopted, and also
an Action Plan based on the Strategy. The National Judicial Reform Strategy
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identifies the challenges faced by the judiciary within the framework of four key
principles and corresponding aims. The Action Plan lists concrete activities which are
needed in order to achieve those aims, directed towards enhancing the accountability
and independence of courts, the rule of law and harmonisation of regulations with
European and international legal standards. The main aim of the judicial reform is to
increase the quality of judicial practice and bring it to a level equal to those of modern
European societies. A number of laws are either before parliament or in the
preparatory stage, including the following: Law on Public Notaries, Law on
Requirements for Performing Expert Assessments, Law on Organisation and
Competences of the State Authorities in Suppressing Organised Crime, Law on the
State Authorities and the Procedure in connection with Criminal Offences Against
Humanity and other Assets Protected by International Law, Law on the Training of
Judges, Public Prosecutors and Deputy Public Prosecutors and Judges’ and
Prosecutors’ Assistants, Law on the Anti-Corruption Agency, Law on Confiscation of
Property Acquired through Crime, Law on a National DNA Register, Law on
Commercial Offences, Law on Special Custodial Regime, Law on Alterations and
Amendments to the Law on Torts and Contracts and the Law on the Practice of Law.
The Ministry of Justice will also continue activities in connection with international co-
operation and European integration processes, in particular on harmonising domestic
legislation with EU regulations, standards of the U.N. and the Council of Europe,
monitoring fulfilment of international obligations, promoting the ongoing dialogue with
the EU and realising European Partnership priorities.
Important reform goals have already been reached with international assistance and
support. Most of the projects concerned upgrading the human, material and technical
capacities of the judiciary in the Republic of Serbia, and development of legislation.
The following list presents an overview of the most important projects in the 2001-
2006 period.
Most important projects in the judiciary in the 2001-2006 period:
1. Access to Justice
2,500,000 GBP United Kingdom Completed
2. Training of judges, prosecutors, defence attorneys and police investigators in international law and extradition of war criminals
1,890,000 SEK Sweden Begun
3. Establishment of Judicial Training Centre UNDP/OSCE
788,000 EUR The Netherlands Completed
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4. Support to the Ministry of Justice CARDS 2004
11,500,000 EUR European Commission Agreed
5. Support for the judiciary (2002 budget)
3,000,000 EUR European Commission Begun
6. Support for the judiciary CARDS 2003
1,000,000 EUR European Commission Agreed
7. Support for Alternative Conflict Resolution project 750,000 CAD Canada Begun
8. Support to judicial reform 1,328.659 CHF Switzerland Begun
9. Support to judicial system and training of judges 8,000,000 SEK Sweden Begun
10. Justice CARDS 2005 - procurement and technical assistance for judicial reform strategy 2,500,000 EUR
European Commission Agreed
11. Independent judiciary project 1,000,000 CAD Canada Begun
12. Judicial reform and rule of law 2001 2,000,000 USD United States Completed
13. Judicial reform and rule of law 2005 2,900,000 USD United States Completed
14. Judicial reform and rule of law 2006 2,900,000 USD United States Begun
15. Judicial reform and rule of law 2003 1,290,000 USD United States Completed
16. Judicial reform and rule of law 2004 5,560,000 USD United States Completed
17. Reform of the Commercial Court 2004 3,550,000 USD United States Completed
18. Reform of Commercial Courts 2004 3,550,000 USD United States Completed
19. Rehabilitation of the Supreme Court 541,278 EUR Germany Completed
20. Co-operation with UNICEF on the project “Prosecution of Minors“ 19,000,000 SEK Sweden Begun
21. SILD: training of judges, prosecutors and lawyers on international law 1.870,000 SEK Sweden Completed
22. SILD: project preparation for training Serbian judges, lawyers and prosecutors for the Hague Tribunal 439,000 SEK Sweden Completed
23. Technical assistance and advisory service for legislative reform in the Republic of Serbia 3.443,000 EUR Germany Completed
24. Improving the judicial system in the Republic of Serbia 33.532.250 SEK
Swedish International Development Agency Agreed
25. Centre for training court personnel – co-financed with UNDP – 2003 9,000,000 SEK Sweden Begun
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26. Centre for training court personnel, UNDP – 2002 4,000,000 SEK Sweden Completed
27. IT equipment for prosecutors’
28. offices – 2003 400,000 EUR EAR Completed
29. Preparation of ADR action plan in Municipal Court – 2004
700,000 EUR EAR Completed
30. Establishment of professional centre for training judges and prosecutors (January 2002 - )
850,000 $ (forming centre) +3,400,000 $ (oper. costs)
UNDP,OSCE (CIDA, RNE) Begun
31. Quicker Access to Courts project (2002- 20 months)
665,000 GBP
United Kingdom -DFID / KPMG Completed
32. Development of rule of law in the Republic of Serbia (December 2005)
550,000 USD US AID / ABA- CEELI Completed
33. Strengthening court administration systems in the Republic of Serbia (May 2003 - May 2006)
300,000 USD
World Bank-Ministry of Justice Completed
34. Strengthening court resources and support to Judicial Training Centre (March 2004 – April 2006)
745,148 USD UNDP / CIDA Completed
35. Strengthening human rights protection mechanism (2004 / 10 months)
100,000 USD UNDP / TTF Completed
36. Raising public awareness in Serbia (2004-2006)
242,593 EUR
Norwegian Foreign Ministry On-going
37. Joint project on capacity building of Ministry of Justice (2003-2006 / 30 months) 1,491,028 EUR EAR / IRZ On-going
38. Strengthening the System of Misdemeanours and Magistrates' Courts in Serbia (2004 – 2006- two years)
1,055,500 $ UNDP / CIDA Ongoing
39. Reform of the judiciary in the Balkans (February 2004 - March 2010)
5,000,000 CAD
Canada / CIDA / Genivar / Ottawa University Begun
40. Reform of the judicial system (2006-2008 / 24 months)
1,121,495 USD UNDP / CIDA Begun
41. Training for judges (2003-2006) 500,000 $ US AID Begun
42. Training for judges (2003-2006) 304,303 $ CCASA Begun
43. Support in reform of system for cautions (March 2006 - April 2007)
1,200,000 CAD Council of Europe-CIDA Begun
44. Serbian correctional system (March 2006 - September 2007)
1,200,000 CAD OSCE/CIDA Begun
45. Entrepreneurship system development in south-eastern Europe (November 2004 – April 2006)
325,000 CAD IFC/CIDA Completed
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46. Independence and impartiality of judges (September 2001 – April 2005)
715,113 CAD
CIDA –International Advocates Commission, Canada section Completed
47. OSCE support to the Ministry of Justice and the Ministry of Internal Affairs (2001-2006)
196,105 USD OSCE Completed
The judicial reform framework in the Republic of Serbia contains 12 main reform
objectives. Each of the key principles contains three aims. Individually and together,
these reform goals and associated projects deal with the main challenges now faced
by the judiciary. The judicial reform framework is shown in the following table, where
the initiatives are grouped according to short-term (2006-2007), medium-term (2008-
2009) and long-term (2010-2011) implementation deadlines.
Table 30. Judicial reform framework
AIMS
TIMEFRAME
INDEPENDENCE
ТRANSPARENCY
RESPONSIBILITY
EFFICIENCY
Short-term (2006-2007)
Independent management
Open process of election,
advancement, accountability and
termination of judgeship
Clear standards for assessing
performance and results of judges’
work
Better access to
justice
Mid-term (2008-2009)
Independent budget-funded
authority
Corresponding access to information
from court records and proceedings
Efficient management of
court cases
Standardised system of training
and advanced training for staff
Long-term (2010-2011)
Independent definition of
general framework and internal
organisation and work of courts
Improved relations with the public and public participation
Efficient use of resources by courts and by prosecution
services
Modern network of courts
The following priorities have been identified in the realisation of these aims:
• ensuring better legal security;
• improving the efficiency of the courts, the public prosecution service and the state
attorney’s office;
• preparing a programme of comprehensive clearance of delayed cases in order to
ensure judicial processing within a reasonable timeframe, the long-term goal
being complete clearance of all backlogs;
• providing additional procedural training for judges and prosecutors, especially in
the areas of economic crimes, corruption and organised crime;
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• simplifying and standardising court procedures, both on the legislative level and
in practice (e.g., by exchanging good-practice data), with the aim of improving the
efficiency of prosecuting cases and decision making process by public
prosecutors and judges;
• working to computerise all court business (introduction of informative registers,
complete use of electronic operations between clients and the courts) in order to
increase efficiency, shorten court processing times and help resolve the backlog
problem;
• working to computerise all parts of the public prosecution service (electronic registers, computerisation of all activities, exchanging all information with courts and the police electronically) so as to streamline and shorten all procedures;
• working to computerise all prisons and other institutions of the Directorate for the Execution of Custodial Sanctions of the Ministry of Justice (electronic data bases on persons deprived of liberty and employees, electronic prison statistics etc.) to increase efficiency;
• working to integrate individual IT systems (courts of general jurisdiction, commercial courts, minor offences courts, the Administrative Court, the public prosecution service and penal institutions) into an integrated Judicial Information System (e-justice within the e-government system) and looking after the protection and security of data in the system(s).
The judicial reform is a complex long-term effort requiring besides legislative and
constitutional changes also significant funds for numerous structural and organisation
changes. In order to guarantee sustainable and successful implementation of the
Strategy, the Republic of Serbia will set aside from available resources requisite
material preconditions and funds for the goals and activities determined in the
Strategy. Support from the international community, especially the European
Commission, the Council of Europe, the World Bank and other international and
regional organisations and governmental agencies which are already providing major
contributions to reforms in Serbia, will also be of great significance for the
implementation of the Strategy.
Realisation of the aims will be ensured through high-priority projects and
programmes in the 2007-2009 period presented in the following table.
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Table 31. High-priority projects and programmes in the judiciary in the 2007-2009 period Sources of funding
Project name Institution in charge
Est. project value (EUR)
Own funds
External funding
Planned start of project
implementation
1. Development of the High Judicial Council and Administrative Office
Min. of Justice,
High Jud.Council
2,650,000 2008
2. Building capacities of Administrative Office to prepare integrated court budget as part of transitional stage to an independent court budget
Ministry of Justice 102,000 2007-2008
3. Building capacities of public relations service in selected courts and improvement of data base of legislation and court decisions
Ministry of Justice 210,000
2007 - 2009
4. Establishment of single mechanism of recording all complaints about the judicial system and establishment of system for analysis and reporting
Ministry of Justice 300,000
2007 - 2009
5. Establishment of integrated court statistics system (performance of individ. courts and judges)
Ministry of Justice 1,325,000 2009
6. Modernisation of IT systems in courts and establishment of computerised case-management system in all courts
Ministry of Justice 1,200,000
2007 - 2009
7. Improving efficiency of court administrations by creating new specialized jobs in court administrations
Ministry of Justice 1,400,000
2007 - 2009
8. Application of the new Criminal Procedure Law (CPL) – training prosecutors and judges for new roles and new legal provisions
Ministry of Justice 3,000,000
2008
9. Procurement of new technical equipment needed for new CPL
Ministry of Justice 1,500,000
2008
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10. Establishment of integrated free legal aid system
Ministry of Justice 1,200,000
UNDP project 2007 - 2009
11. Boosting institutional capacity of the Mediating Centre
Ministry of Justice 2,700,000 2007 - 2009
12. Construction of new building for the National Judicial Training Institute
Ministry of Justice * 2007
13. Establishment of the National Judicial Training Institute
Ministry of Justice 2,112.500 2007 - 2009
14. Identification of investment needs in the large courts in the major cities
Ministry of Justice * 2007
15. Reconstruction and adaptation of a new build-ing for the Min. of Justice of the Republic of Serbia
Ministry of Justice 2,000,000
2,000,000. NIP
2007
16. Reconstruction and adaptation of the building housing the District Public Prosecutor’s Office and the First and Second Municipal Public Prosecutor (Zeleni venac No. 18)
Ministry of Justice 2,200,000
2,200,000
NIP2006-2007
17. Building capacities of the Administrative Office to prepare an integrated court budget as part of the transitional phase towards establishment of independent court budget
Ministry of Justice 102,000 2007-2008
18. Application of the new Criminal Procedure Law (CPL) – training prosecutors and judges for new roles and new legal provisions
Ministry of Justice 3,000,000 2008
19. Procurement of technical equipment for application of new CPL
Ministry of Justice 1,500,000 2008
20. Establishment of integrated free legal aid system
Ministry of Justice 1,200,000
UNDP project 2007 - 2009
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21. Establishment of new more efficient network of courts and prosecution services (reconstruction, adaptation, outfitting)
Ministry of Justice 49,500,000 13,600,000
NIP
2007 - 2009
22. Establishment of State Prosecutors’ Council
Ministry of Justice 1,200,000 2007 - 2009
23. Training prosecutors for a new and wider role in collecting evidence and managing cases
Ministry of Justice *
2008-2009
24. Building capacity of the Ministry of Justice in sectors directly involved of EU association process
Ministry of Justice 700,000
2007 - 2009
25. Improvement of conditions in custodial institutions in accordance with international standards
Ministry of Justice 25,000,000 12,000,000
NIP
2007 - 2009
26. Introduction of integrated reporting system in the Directorate for Executing Custodial Sanctions
Ministry of Justice 500,000
2007 - 2009
27. Promotion of other forms of sanctions besides custodial sanctions for punishing and re-edu-cating convicted persons
Ministry of Justice 500,000
2007 - 2009
28.1. Adaptation of Pavilion I in the Sremska Mitrovica prison
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
1.130,000 1.130,000 NIP 2007
28.2. Construction of pavilion for serving sentences with reception department, hospital, drug-free unit, laundry and other facilities in the Novi Sad District Prison
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
956,000 956,000
NIP 2007
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28.3. Construction of new prison building with a maximum capacity of 450 inmates in Padinska Skela
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
6,000,000 6,000,000
NIP 2007
28.4. Adaptation of Special Prison Hospital and District Prison in Belgrade (block refurbishment)
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
1.400,000 1.400,000 NIP 2007
28.5. Construction of detention unit and reception department and reconstruction of Pavilion B in the Niš Prison
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
1.200,000 1.200,000
NIP 2007
28.6. Construction of residential unit for persons deprived of liberty with infirmary in low-security unit of Sremska Mitrovica Prison
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
880,000 880,000 NIP 2007
28.7. Construction of facility for treating convicted drug addicts in the Sremska Mitrovica Prison
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
800,000 800,000 NIP 2007
28.8. Adaptation and repair of Special Detention Unit in Ustanička Street No. 29, Belgrade
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
688,000 688,000 NIP 2007
28.9. Installation of natural gas supply in Niš Prison
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
238,000 238,000 NIP 2007
28.10. Construction of building for accommodating convicted persons in District Prison in Subotica
Ministry of Justice
Dir. for Exec. of Custod.
Sanctions
159,000 159,000 NIP 2007
29. IT modernisation of courts
Ministry of Justice 4,000,000 4,000,000
NIP 2007
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30. Reducing corruption and achieving anti-corruption culture on the level of well-developed European countries
Ministry of Justice 2,000,000. 2008
3.15. Promoting international economic relations Topics in connection with the promotion of foreign economic relations discussed in
this section include attracting foreign investments, concessions, bilateral economic
relations, as well as multi-lateral economic co-operation, accession to the World
Trade Organisation (WTO), the foreign trade policy and regime, international
development assistance, as well as reform of legislation on international economic
relations.
Besides the general strategic framework defined in the National Strategy for
Accession to the European Union, the Poverty-Reduction Strategy, the Strategy for
Reforming the Public Administration, and the Action Plan for Implementing European
Partnership Priorities, policies and high-priority aims in the area of international
economic relations are also defined in the Strategy of Encouraging and Developing
Foreign Investments and the Action Plan for Removing Administrative Obstacles to
Foreign Investment.
Activities on promoting international economic relations call for a high-level of inter-
sectoral co-operation and coordination, as well as an active role of the Ministry for
International Economic Relations (MIER), on the realisation of sectoral and
intersectoral strategic documents, by securing international support for the
implementation of national developmental priorities.
The institutional framework in this area are the Ministry of International Economic
Relations, the Serbian Investment and Export Promotion Agency, and several
governmental commissions formed to facilitate inter-sectoral coordination and
decision-making on various issues: the Commission for Stimulating Investments in
the Serbian Economy, the Commission for Coordinating Humanitarian and
Developmental Assistance, the Commission for Coordinating the Process of
Accession to the WTO.
Negotiations and the process of concluding bilateral agreements on economic,
commercial and scientific and technological co-operation, as well as monitoring the
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implementation of such agreements, are done by joint committees and commissions
and ad hoc working groups formed for specific areas of co-operation.
Systemic laws in this field are the Law on Foreign Investments, the Law on
Concessions and the Law on Foreign Trade Transactions.
The Law on Concessions (Official Gazette of the RS, No. 55/03) has widened
considerably the scope for foreign investments in the Republic of Serbia.
Concessions are essentially investments into the domestic economy according to the
legal procedure involving equal conditions for all potential investors (domestic and
foreign) through partnership with the public sector, according to the “build – operate –
transfer” principle. It is one of the few laws in the region which emphasises the
principles of transparency, non-discrimination, proportionality and efficiency.
The concessions law provides for investments by way of granting concessions in
various fields up to a maximum of thirty years, which together with the Law on
Foreign Investments forms a framework for the inflow of green-field investments in
the domestic economy. The Serbian economy, subjected to reforms aimed at
establishing market principles, is undergoing massive changes caused by the
privatisation and restructuring process, where the potential for concession
investments, besides the usual gains from the resolution of important infrastructural
problems, creation of jobs and fresh budget income, also has a very positive
influence on improving the quality and cost of services by enhancing the
competitiveness of the market players.
The WTO accession process, after a slowdown caused by the redefinition of the
relations between the republics, was intensified in 2006: negotiations on membership
in the WTO and comprehensive activities in connection with harmonisation with WTO
rules and regulations are in progress, while full membership has been optimistically
forecasted for 2008. Serbia’s membership in the WTO will have a positive effect on
economic growth, reduction of the prices of some products, further foreign trade
liberalisation and a privileged status for Serbia in international trade.
Conclusion of bilateral free trade agreements under the Pact for Stability of
South Eastern Europe has liberalised commodity trade with seven regional countries.
The free-trade zone that should be established in the region by 2010 will also mean a
liberalisation of the services market.
The Ministry of International Economic Relations is among other things involved in
coordination with competent state authorities and organisations aimed at developing
sectoral and inter-sectoral strategies, defining high-priority requirements and
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selecting suitable projects and programmes which should be funded from donations
and development assistance, including resources from international funds for
reconstruction, development and stabilisation, cohesive and structural funds, funds
for regional, international and cross-border co-operation and other bilateral and multi-
lateral sources of specific-purpose funds; informing donors about priority projects and
programmes; co-operating with donors on harmonising their priorities with those of
the Republic of Serbia, preparing donor strategies, planning and realising projects
and programmes funded from donations and developmental assistance; monitoring
the realisation of projects and programmes from reports submitted by users of donor
funds and of development aid and donors; collection of data, analytical processing of
data and drafting reports on donations and developmental aid, as well as other
relevant activities. The institutional basis for programming and coordinating
international assistance has been created and is being enhanced, as are capacities
of the relevant ministries for programming that assistance, as well as management of
EU funds (a department for managing cross-border co-operation programmes and
four regional offices have been formed), and an information system for programming,
monitoring and reporting on international assistance to the Republic of Serbia has
been developed.
Certain activities have been supported by various forms of technical assistance
provided by the international community, including the engagement of experts in the
work on developing strategic documents, action plans, situation analyses,
implementation of laws, improvement of the work of institutions, various types of
seminars and training. It is essential to continue the work on drafting these
documents and the training activities to ensure that they become a permanent
process helping to boost the capacities of the public administration and ensuring
success of the reforms. The reform process in the Republic of Serbia emphasises the
importance of adequate professionalism of the personnel rendering technical
assistance, as well as corresponding human resources on the user side.
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The most important completed or on-going projects in the field of international economic relations (2001- 2006 period):
1. Support for programming and implementation of Norwegian assistance (Norwegian bilateral
assistance, 132,000€, 2005)
2. Technical assistance in the process of accession to the WTO (USA, 4,250,000$, 2001)
3a. Technical assistance for implementation of Cross-Border and Neighbour Co-operation Programme
(ЕАR, 1.5 + 1 million €) October 2004 – October 2006 + 300 workday extension
3b. Capacity building, Unit for Managing Cross-Border and Neighbour Co-operation Programmes of the
Sector for Donations and Development Aid
(UNDP/EAR/MIER: 54,600€/ 927,904€/ 64,200€) June 2005 – July 2007
4. Trade policy and strategy of accession to the WTO (Switzerland, 491,000€, 2004)
5. Joint support programme for the Sector for Donations and Development Aid / MIER (SIDA / DFID,
1,778,000€, 2006)
6. Upgrading SIEPA capacities (EAR, 4.5 million € – CARDS 2004)
7. PLAC – Policy and Legal Advice Center (part of CARDS programme, 1.5 million EUR, support for
processes of accession to the EU and WTO). Beneficiaries of funds were the MIER and the Serbian
EU Integration Office.
Ensuring the full contribution of the state authorities in the process of integration of
the Republic of Serbia in the European Union requires continuous assistance for
building up their capacities. The importance of building up the administrative
capacities involved directly in the integration process is clearly defined in the defined
short- and medium-term European Partnership priorities, as well as priorities of the
strategies of the competent ministries. It follows that it is necessary to make provision
for continuous development of all structures involved in the European integration
(especially structures attached to ministries) and for the establishment of
mechanisms for their mutual co-operation. The CARDS Programme envisages a
Twinning programme for accession to the WTO – 1.5 million EUR for 2007 and 2008.
Part of these funds will be used for the realisation of this priority. Building up
capacities for the implementation of the process of European integrations and
utilising European Union funds also implies improvement of the overall coordination
of programme goals and activities at the Government level, as well as of institutional
capacities for operational planning in the competent ministries, with the aim of
improving the process of policy-making and linking the priorities of the Government
with available funds from the Budget and international assistance. Accordingly, it is
necessary to upgrade capacities in the competent ministries with the aim of
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improving planning of priorities through the development of comprehensive and more
realistic sector plans of activities which would make possible successful
harmonisation of programming the budget and international funds in accordance with
the priorities of European partnership and priorities defined in the national strategic
documents.
In the area of managing international development assistance, in the forthcoming
period the aim is to improve the effectiveness and efficiency of international
assistance through the following: aligning donor activities with national development
priorities; improving the coordination and harmonisation of international assistance;
linking the process of planning and utilising international assistance with budget
resources; building up and consolidating capacities in the relevant institutions at
republican and local level for managing the EU funds (new financial instrument for
the 2007-2013 period – Instrument of Pre-Accession Assistance- IPA), and especially
for the introduction of a decentralised system of managing those funds37.
Two processes which are going on in parallel – accession to the WTO and the EU
integration– are a framework for development of the export-oriented concept of
development of the Republic of Serbia. Accordingly, it is necessary to continue
reforms aimed at adopting WTO rules and fulfilling obligations towards the WTO in
order to speed up the process of joining that organisation.
It is a fact that the EU is now Serbia’s biggest trade partner and that its share in
overall trade will continue to grow as Serbia comes nearer membership in the EU,
and this calls for the existence of a well-developed market economy in Serbia as one
of the most important requirements for being able to face competition and strong
market forces in the EU. This is especially important in view of the EU’s enlargement
to 25 members, including the latest, Romania and Bulgaria. These developments in
our region make it essential to locate niches on the EU market, which calls for
increasing the competitiveness of domestic production in the function of developing a
global quality of goods and services, whereby exports are increased. Foreign trade
policy must primarily be defined by those demands that it will face from the
establishment of a zone of free trade with the EU in the context of the Agreement on
Stabilisation and Association. Accordingly, it is necessary to continue requisite
adjustment of the foreign trade regime and make it compatible with autonomous trade
37 The aim of switching from a centralised to a decentralised system of managing EU funds represents gradual preparation of the Republic of Serbia to assume control of managing EU funds from the European Commission at the moment of joining the EU.
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measures, WTO regulations and the future Agreement on Stabilisation and
Association.
Another priority goal in the medium term is the development of bilateral economic co-
operation, conclusion and implementation of free-trade agreements, and especially
negotiations for the conclusion and monitoring of the implementation of a free-trade
agreement in the south eastern European region.
In the transition countries and underdeveloped countries foreign investments are the
principal engine of economic development, revenue growth, economic modernisation
and poverty reduction. Adoption of the Strategy for Encouraging and Attracting
Foreign Investments is the first step towards that aim. The Strategy’s aims are to
create favourable conditions for foreign and domestic investments, create a positive
framework for attracting, retaining and expanding internationally competitive and
export-oriented investments which will improve and stabilise the commercial
environment, upgrade the technologically outdated economy, ensure
competitiveness on domestic and world markets and create new jobs in the Republic
of Serbia.
For its implementation it is necessary to effect appropriate reforms of legislation,
upgrade institutional capacities, create conditions for enhancing competitiveness and
invest in internal and international marketing campaigns, carry out a land reform
(restitution of urban building land), streamline the procedure of issuing building
permits, and upgrade spatial and urban planning, reform the education sector in
keeping with requirements of the labour market, economic development and foreign
investments in order to create a climate conducive to investment. One of the ways to
build up the confidence of foreign investors is certainly the establishment of the Fund
for Stimulating Foreign Investments.
The Fund for Stimulating Foreign Investments should be founded by the Government
at the initiative of the MIER, which will finance its work initially. In the Fund would
also be invested capital from international financial institutions (such as for example
the Caisse des Depots with whom contacts have already been established and who
are ready to contribute to the Fund). From those funds would be formed credit lines
which would serve to finance activities and objectives defined by the Strategy for
Encouraging and Attracting Foreign Investments.
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The following activities are seen as priorities in the next three years:
Programming, coordination and monitoring the implementation of international
development assistance:
• Programming of the EU funds by drafting the guidelines for identifying priorities
and drafting project fiches, as well as assisting the relevant ministries in drafting
them.
• Carrying out training for successful programming and implementation of the EU
funds.
• Support to ministries in the process of strategic planning and budgeting.
• Initiating and taking part in the identification and launch of new institutions, raising
their capacities, and building the capacities of existing ones, related to the
implementation of a decentralised implementation system for EU funds - Pre-
Accession Instrument - IPA.
• Continuation of the implementation of existing cross-border co-operation
programmes (Hungary-Romania-Serbia and Montenegro Neighbourhood
Programme, Romania-Serbia and Montenegro Neighbourhood Programme,
Bulgaria-Serbia and Montenegro Neighbourhood Programme, CADSES and the
New Adriatic Neighbourhood Programme – CARDS funds for 2005 and 2006) by
sending out invitations to submit project proposals, training potential end-users at
national and local level, harmonising programme documents with the new
financial instrument of the EU. Work is also under way on drafting new
programme documents for the 2007-2013 period for all of the aforementioned
programmes.
• Work on the development of programme documents and programmes of
Neighbourhood Co-operation with Bosnia and Herzegovina, the Republic of
Croatia and the Republic of Montenegro.
• Aligning the international assistance with national priorities.
• Implementation of the sector support concept, increasing the level of predictability
of foreign funds and upgrading and more intensive use by donors of the national
system for public procurement and financial management.
• Upgrading and development of the ISDACON information system which registers
international assistance provided to the Republic of Serbia (adaptation of the
system to monitor projects realised within the Neighbourhood programmes will
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continue with training of users at national and local levels, the information
provided will be diversified and a stable version of the data base will be
completed). Given that the development of the Information System is now being
funded by donors, in September 2006, after the existing funding agreement
expires, the IS will pass into Government ownership and will be funded from
Government budget funds.
Reform of foreign economic relations legislation:
• Development of a Draft Law on the Management of International Assistance, which
would cover the coordination of financial, technical and other assistance (EU funds
and bilateral aid) and the management of that assistance.
• Adoption and implementation of the Law on Industrial Parks, development of a
register of industrial parks and promotion and presentation,
• Improving the perception of the investment risk (Country risk) of the Republic of
Serbia in the leading international institutions and organisations covering this area
and reducing that risk as fast as possible.
Multilateral and regional trade co-operation:
• Establishment of a free-trade zone in south-eastern Europe in 2007,
• Membership in the WTO, late in 2008,
• Completion of negotiations and conclusion of Agreement on Stabilisation and
Association with the EU, 2007,
• Start of talks on an agreement on free trade with the EFTA countries, 2007,
• Gradual harmonisation and liberalisation of the overall economic and foreign-
trade system in line with WTO rules and EU regulations and gradual introduction
of EU Customs Code regulations,
• Intensification of co-operation with the OECD, UNCTAD and UNECE.
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Foreign trade policy and regime:
• Upgrading the foreign trade system and policy so as to facilitate foreign trade,
analyses of their implementation, and adoption of strategies and measures aimed
at promoting exports,
• Adjusting the foreign trade system and mechanisms to comply with international
financial and economic institutions’ standards (WTO, EU, EFTA, etc.).
Attracting foreign investments:
• Reform of regulations relevant to foreign investments (alterations and
amendments to laws eliminating the last remaining administrative obstacles to
foreign investments, adoption of laws which will increase competitiveness of the
Republic of Serbia as a regional investment destination, their harmonisation with
the EU regulations).
• Building up institutional capacities (training human resources at local and
republican level for providing support to foreign investors, establishing an
information centre attached to the Government, forming an expert working group
for Information and Communication Technology [ICT] made up of representatives
of the Government, the public sector, the private sector [industrial ICT] and
academics to help define necessary ICT training and infrastructural needs,
establishing pilot IT committees at local level, with the participation of the private
sector, educating MIER and SIEPA employees in the areas of promoting
investments and the business climate, good examples of legislation conducive to
foreign investments).
• Activities on increasing competitiveness (financial support for the development of
industrial and technological parks, financial support for the establishment of
clusters, feasibility study of granting concession for exploitation of natural
resources in the Republic of Serbia, drafting programmes of proposed
concession investments and a promotional manual with concession projects,
foundation of a Concession Office/Concession Agency, establishing a fund for
stimulating foreign investments).
• Internal and international market campaign (international promotion of the
investment climate in the Republic of Serbia, raising awareness on the
significance of foreign investments (as well as all new investments) at local level,
promotion of investment leaders and the most successful municipalities in
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attracting foreign capital, building up Serbia as a brand conductive for foreign
investments, lobbying to boost the country’s good reputation).
Bilateral economic co-operation:
• Monitoring the implementation of the Agreement on Free Trade with the Russian
Federation and further trade liberalisation,
• Conclusion of bilateral free trade agreements with Turkey, the Ukraine and
Belarus and other countries which are launching identical or similar initiatives at
bilateral level.
• Monitoring the work of existing business and trade councils and working to create
new ones, organisation of business conferences and economic fora with the aim
of promoting potential advantages of investing in the domestic economy and
opportunities for balancing export and import flows in bilateral commodity trade.
• Promoting bilateral economic relations (especially increasing Serbian exports and
foreign investments) with the EU countries and other industrialised countries in
Europe, as well as the major overseas economies (USA, Canada, Japan);
• Developing bilateral economic co-operation and good-neighbourly relations with
neighbouring countries and the rest of south east Europe;
• Intensifying bilateral economic relations with the Russian Federation and China
and major developing countries (India, Egypt, Iran, Morocco).
• Adoption of a plan of meetings of inter-governmental joint committees and
commissions (at annual level, quarterly and by partner country);
• Adoption of proposals for appointments of presidents of the Serbian parts of inter-
governmental joint committees and commissions;
• Adoption of national strategies of development of bilateral economic relations and
co-operation with strategic economic partner countries.
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Concessions:
• Given that concessions are within the competences of several ministries and
other public agencies and institutions, an appropriate inter-sectoral body should
be established, which would operate according to principles similar to those valid
for the Commission for Stimulating Investments in the Economy of the Republic
of Serbia and work on defining priorities, developing activities and undertaking
planning for the entire area of concessions.
• Establishment of an agency/bureau for concessions which would do research,
studies and analyses to serve as a basic for upgrading and implementing
concession policy, perform administrative and profession supervision of the
performance of concession deals and conduct communications with existing and
potential concession holders.
• Preparation and publication of a concession manual to point out the relationship
between various laws which implementation is necessary in the preparation of
proposals for granting concessions, and also during the realisation of the
concession project itself.
Table 32. Programme of high-priority reform projects in the area of promoting international
economic relations in the 2007- 2009 period Sources of funding
Project name Institution in charge
Est. project value (EUR) Own funds External
sources
Planned start of project
implementation Documentation
status
Training of staff of competent institutions for successful programming and implementation of EU funds
MIER 10,000,000 2007 - 2009
Support for preparing introduction of decentralised implementation system for managing EU funds in the Republic of Serbia – technical assistance
MIER MoF
229,339.00 229,339.00 Government of the Kingdom of Norway
2007 Project proposal prepared
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Building capacities of MIER for implementing Neighbourhood co-operation programmes
MIER, relevant ministries, local offices for implementing neighbourhood programmes
1,000,000 MIER employees and those of relevant ministries involved in these activities
900,000 EU 2007-2009 Proposal for continuation or a new project under preparation
Neighbourhood Programmes (IPA)
MIER Cca 23,000,000
Owns funds at least 15%
Cca 20 million EUR (IPA)
2007 -2009 Programme documents for bilateral & multi-lateral programmes for 2007-13 period under preparation
Regional co-operation – implementation of agreements with neighbouring countries, especially those relating to free trade and cross-border co-operation, and the regional free trade agreement
9,193,380.94 dinars for 2006
Travel costs of Working Groups for negotiations covered by CLDP (US Government fund)
2007
Implementation of Decree precisely defining implementation of anti-dumping measures, Decree precisely defining implementation of compensatory measures and Decree precisely defining implementation of measures of protection from excessive imports, based on provisions of the Foreign Trade Operations Law;
2,062,514.28 dinars approved for 2006 budget year Proposed funding for 2007: 5,500,000 dinars
Part of funds from Twinning Programme for 2007 and 2008 worth 1.5 million EUR38
On-going project
Adoption and implementation of Law on Industrial Parks, formation of Register of Industrial Parks and promotion of industrial parks in Serbia
MIER 70,000 500,000 dinars (for Register only)
- 2007 Law has entered the adoption procedure
38 Implementation of procedures according to these decrees requires consideable additional funds from the budget whose size cannot be estimated at this moment in time.
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Drafting Law on Optical Disks
MIER 10,000 - 2007 Foundations defined
Drafting Law on management of the international assistance and appropriate changes of the law on the public administration and relevant secondary legislation
MIER 30,000 - 2007
Foundations defined
Drafting Law on Denationalisation
MIER MoF
25,000 - 2007 Foundations defined
Establishment of direct contacts with institutions which assess countries’ investment risks, - analysis of methodological approaches of those organisations in the process of assessing national investment risks (Country risk);
MIER MoF MoInterior MoJ
120,000 - 2007 Direct contacts realised with COFACE insurance company, contacts also established with FATF/GAFI with the aim of starting direct negotiations for Serbia’s membership
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Attracting foreign investments – personnel training at local and republican level – study trips for employees of Sector for Foreign Investments (agencies for promoting investments in Czech Republic, Hungary, Ireland and Estonia) Organisation of seven smaller thematic and two major seminars for representatives of all municipalities about the significance of foreign investments and communication with investors
35,000 28,000
2007 Preparatory phase
Establishment of information centre attached to Government; Site – Investor Tracking System
MIER SIEPA
76,000 2007
International promotion of investment climate in the Republic of Serbia – taking part in international fairs, investment fora;
MIER 52,000 2007-2009 List of international events
Development of statistical data base of foreign investments – by investor, branch, location in the Republic of Serbia
MIER, SIEPA, NBS, Republican Statistics Office
95,000 2007
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Promotion of investment leaders – publication of list, media promotion, organisation of promotional gatherings of the most successful municipalities (quarterly)
MIER 16,000 2007 Plan of activities, list of the most successful municipalities and success story investors
Preparation of promotion materials on investment conditions, and translations
MIER 7,000 2007-2009
Lobbying to promote the country’s reputation – targeting investors
MIER 20,000 2007 - 2009 List of desirable companies
Preparation and publication of manual for concessions
MIER
Technical assistance in shaping new sector/ administration profile
MIER
3.16. Defence In the defence sector there are two main strategic documents: the Strategic Defence
Survey and Plan of Development of the System of Defence until the Year 2010; their
preparation is in its final stage and they are expected to be adopted by end of 2006.
The Strategic Defence Survey is the main long-term strategic planning document in
the system of defence and the key instrument for implementing reforms in the
Ministry of Defence and the Army of Serbia until the year 2010. The Plan of
Development of the System of Defence until the Year 2010 is the main operational
document for planning development in the system of defence which should be in the
service of the implementation of envisaged organisational changes and resolution of
key problems in the system of defence in the period until the year 2010. The
document should include programmes and projects for the development of individual
segments of the defence system and thereby make possible the implementation of
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solutions defined by the Strategic Defence Survey in the said period taking into
consideration available resources.
The most important Ministry of Defence projects in the 2000-2005 period: 1. ‘PRISMA’ project:
• Programme of training for civilian professions;
• Motivational training programme;
• Programme of informing on small and medium-sized entrepreneurship;
• Programme of providing advice and assistance in seeking new employment;
• Programme of regular redundancy payments.
External sources of funding On-going
2. Reform of the state administration – support for reform of the Ministry of Defence
External sources of funding On-going
3. IT technology development External sources of funding On-going
One of the most important projects so far in the Ministry of Defence is ‘PRISMA’ – the
Programme of Resettlement in the Army, whose aim is comprehensive resolution of
social problems of persons whose employment in the military is being terminated and
their economic integration into non-military structures. The realisation of the following
programmes has commenced: training for civilian professions; motivational training
courses; providing information about small and medium-scale entrepreneurship;
advisory services and assistance in looking for new employment; regular redundancy
payment programme. The ‘PRISMA’ programme (with its 11 sub-programmes) is
planned to continue until 2010, the focus being on the following activities:
continuation of re-training activities for officers and the start of corresponding training
for NCOs and civilian army employees; establishment of a Guarantee Fund to help
re-employ former armed forces personnel; establishment of business incubators;
intensifying media support and marketing activities in connection with the
programme. On-going ‘PRISMA’ activities require considerable funds from own
sources and donations. The NIP includes an allocation for the defence sector, for the
modernisation of aircraft for military and civilian purposes - 30 million EUR, for 2006
and 2007. Viewed overall, realisation of Defence Strategy aims and the vision of the
Army anticipated for the year 2015 require defence spending of about 2.4% of the
GDP.
The European Partnership document in its defence segment sets medium-term
priorities demanding “continuation of the process of restructuring and reforming the
armed forces, including, as needed, personnel cuts (taking into consideration the
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social effect), transformation and privatisation of defence assets and the defence
industry, as well as more transparent civilian control”. Continuing reforms calls in the
Ministry’s view for implementing or continuing the following high-priority programmes
(Table 33).
Table 33. High-priority programmes of the Ministry of Defence in the 2007-2009 period
Sources of funding
Project title Institution in charge
Estimated project value
(EUR) Own funds
External sources
Planned start of project
implementation
1. PRISMA project: • Continuation of
re-training programme for officers and start of corresponding programme for NCOs and civilian army personnel;
• Establishment of Guarantee Fund to promote re-employment of persons leaving the military;
• Establishment of business incubators;
• Intensifying media support and marketing activities
MoD
2,000,000
External
sources of funding
2007-
2. Housing problems, MoD and Serbian Army staff
MoD 50,000,000
50,000,000 2007-
3. Civil Defence reform
Government of Serbia 2,000,000 2,000,000 2007-
4. Harmonisation of defence legislation with EU standards
MoD 1,000,000
1,000,0000 2007-
5. Construction of eight new mid-size storage facilities and reconstruction of 21 existing ones
103,000,000
6. Modernisation of information centres
1,000,000
7. Modernising and updating early-warning systems
500,000
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8. Outfitting and training expert team and four operational teams for detecting and disposing of unexploded ordnance
500,000
9. Building, establishing and outfitting two training and rescue centres (Civil Defence bases) in Belgrade and Novi Sad
3,000,000
10. Disposal of surplus munitions
MoD 15,000,000
15,000,000
Source: Ministry of Defence * Part of the funds will be secured from own sources; it is not possible to estimate the precise figures at this moment.
